Fed's Richard Clarida says policy appropriate if economy stays on track

Fed's Richard Clarida says policy appropriate if economy stays on track

Fed's Richard Clarida says policy appropriate if economy stays on track

"US economy is in a good place with low unemployment, inflation still muted but expected to rise to the target".

While Mr. Clarida provided no hints about the future direction of interest rates, he said "the downside risk of the global outlook is maybe diminished a bit" and softening global growth may be bottoming out.

I believe that monetary policy is in a good place and should continue to support sustained growth, a strong labor market, and inflation running close to our symmetric 2 percent objective.

The Fed cut interest rates three times previous year but signaled at its last meeting that it expected to keep rates on hold for the foreseeable future unless there a significant change in the US economic outlook.

Former Fed chair Ben Bernanke said at an economics conference on Saturday that central banks "have come nearly full circle" since the days of runaway inflation several decades ago.

Clarida suggested the committee wants to give the rate cuts time to work through to inflation expectations and actual prices.

Minutes of that meeting released last week showed officials were still concerned about economic weakness overseas and subdued inflation, which ran below the Fed's 2% target past year.

The Fed kept the discount rate unchanged at 2.25% at its December 10-11 meeting in keeping with its unanimous decision to also leave its benchmark overnight lending rate in a target range of between 1.50% and 1.75%.

Investors now see the central bank cutting rates once this year but not until at least September. They also signaled policy would be on hold through 2020, keeping the central bank on the sidelines during a USA presidential election year. Even so, "we do think that policy is appropriate, and, under our baseline outlook, will continue to be appropriate". In 2019, sluggish growth overseas and global developments weighed on investment, exports, and manufacturing in the United States, although there are some indications that headwinds to global growth may be beginning to abate.

St. Louis Fed President James Bullard, speaking later on Thursday in Madison, Wisconsin, played down the risks to the USA economy from geopolitical tensions.

As 2015 unfolded with continued low inflation, the Fed ended up not hiking rates until December of that year, with the Fed waiting another full year before it boosted rates by another small quarter-point in December 2016.

Oil prices rose in anticipation of retaliation by Tehran but have since fallen back, reassured by the restraint shown so far by both sides. As a result, President Donald Trump, who tapped Powell to succeed Yellen, complained that the central bank had raised interest rates too much and harmed the economy and the stock market.

Yellen, for her part, noted that while the panel had a "range of views" on how to reword the policy statement, she said she appreciated the panel's willingness to find common ground so the Fed could "communicate our policy intentions to the public as clearly as possible".

An improvement in trade tensions and progress in tariff negotiations with China could increase optimism and encourage businesses to invest, Kashkari said in an interview with Fox Business.

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