Fed's Clarida sounds upbeat note on economic outlook

Fed's Clarida sounds upbeat note on economic outlook

A top Federal Reserve official believes that the US central bank needs to re-orient its thinking and policies toward fighting inflation that is too low, rather than its historic focus on keeping inflation from getting too high.

In her first year as President of the Federal Reserve, Janet Yellen was chairman of a policy panel divided over how long the central bank could afford to keep its reference rate at a record level and how to prepare the financial markets for the start of interest rate increases. That is a challenge for Fed policymakers, because it means that they have less room to cut their benchmark interest rate in the event of a recession.

Investors see nearly no chance of a rate cut in the next six months, according to pricing in federal funds futures contracts. The actual transcript of what is said during the meetings is only released for five years. Officials held the rate steady in December and indicated they felt no urgency to reverse those cuts anytime soon, leading analysts to project the Fed would be on hold for the foreseeable future. Historically, the central bank has reduced rates by roughly 5 percentage points in a downturn. As we enter 2020, let me emphasize that we stand ready to adjust the details of this program as appropriate and in line with our goal, which is to keep the federal funds rate in the target range desired by the FOMC. While few people are concerned by low inflation, the Fed prefers to maintain a cushion against deflation, a destabilizing drop in prices and wages. Below are additional key takeaways, per Reuters.

The Fed should consider "doubling down" on its inflation target, he said. Although the unemployment rate is at a 50-year low, wages are rising broadly in line with productivity growth and underlying inflation.

Still, "we think we do have the tools that will be able to achieve" the Fed's target, Mr. Clarida said. Overshooting could reverse the decline in inflation expectations. Over the 12 months through November, PCE inflation was running at 1.5 percent, and core PCE inflation, which excludes volatile food and energy prices and is a better measure of underlying inflation, was running at 1.6 percent.

"A lack of credibility is one of their biggest problems", Swonk said. He said the growth of USA energy production may have made oil shocks "neutral on net" for the country while the Fed has a "reasonable chance of achieving a soft landing" this year.

Never miss the latest news from the Star.

"Low inflation can be risky", Bernanke said.

Related Articles

  • Tina Fey And Amy Poehler Returning To Host 2021 Golden Globes

    Tina Fey And Amy Poehler Returning To Host 2021 Golden Globes

    Fey, who created and starred in 30 Rock , is creating and executive-producing an NBC comedy starring Ted Danson as an L.A. mayor. The news was announced by Poehler herself at the Television Critics Association winter press tour on Saturday.
    'Go Back Modi': West Bengal on Modi's two-day visit

    'Go Back Modi': West Bengal on Modi's two-day visit

    According to a senior BJP leader, the party is likely to apprise the PM of the deteriorating law and order situation in Bengal. Prime Minister Narendra Modi has asked the common man to share their ideas and suggestions, ahead of the Union Budget .
    Bitcoin price set for a massive surge in 2020, report

    Bitcoin price set for a massive surge in 2020, report

    However, geopolitical tensions do have a positive price impact as was evidenced with the US/China trade war. Increasing gold prices are also likely to favor bitcoin's price this year, according to McGlone.
  • Sanders leads, with Warren, Buttigieg, Biden chasing in Iowa Democratic poll

    Sanders leads, with Warren, Buttigieg, Biden chasing in Iowa Democratic poll

    But another candidate struggling in Iowa - California billionaire Tom Steyer - will be debating in Des Moines on Tuesday. The margin of error of +/- 3.7 percent indicates an extremely tight race among the top tier of candidates.
    Stocks Inch Higher After Iranian Strike Roiled Markets

    Stocks Inch Higher After Iranian Strike Roiled Markets

    The yield on 10-year Treasuries fell two basis points to 1.85%.Britain's 10-year yield was little changed at 0.819%. The S&P 500 posted 61 new 52-week highs and 1 new low; the Nasdaq Composite recorded 106 new highs and 27 new lows.
    Wendy Williams On Rob Kardashian's Custody War Blac Chyna: Reaction

    Wendy Williams On Rob Kardashian's Custody War Blac Chyna: Reaction

    Close bond: The Keeping Up With The Kardashians star has always been close with her brother, who lived with her for several years. Rob alleges that Blac Chyna's behavior has changed and according to the report, Blac Chyna's hairdresser is backing up the story.
  • China: One dead from mysterious new virus, dozens sick

    China: One dead from mysterious new virus, dozens sick

    The researchers described the infectious agent as a "coronavirus", identified in a hospitalised person with pneumonia in Wuhan. All 739 close contacts, including 419 medical staff, have undergone medical observation and no related cases have been found.
    Cottrell six seals one-wicket win for Windies

    Cottrell six seals one-wicket win for Windies

    Rain delays impacted the Windies' chase as Nicholas Pooran (52) and Kieron Pollard (40) looked to have them on track for victory. Earlier, West Indies fast bowler Alzarri Joseph picked up four wickets as Ireland stumbled to 180 all out in the 47th over.
    The Best Tweets About Prince Harry and Meghan Marke's Announcement

    The Best Tweets About Prince Harry and Meghan Marke's Announcement

    They said in the future they would "engage with grassroots media organizations and young, up-and-coming journalists". Henson and Rosie O'Donnell added, "u will always be royal to me".
  • Pokemon Mystery Dungeon Rescue Team DX Will Arrive in March 2020

    Pokemon Mystery Dungeon Rescue Team DX Will Arrive in March 2020

    For one of my favorite games, this is awesome news and definitely something to look forward to this new year. A recent Pokemon Direct presentation revealed that an Expansion Pass is coming to Pokemon Sword and Shield .
    Tiger announces first outings for 2020

    Tiger announces first outings for 2020

    In its first year with elevated status, the longstanding tournament is now an invitational, with Woods serving as tournament host. Woods's win at the ZOZO Championship in Japan back in October took him to 82 wins on tour equalling the record held by Sam Snead.
    Seething Japanese authorities say Ghosn 'only has himself to blame'

    Seething Japanese authorities say Ghosn 'only has himself to blame'

    Earlier in the day, Tokyo prosecutors raided a Japanese lawyer's office that Ghosn had visited regularly before he fled. Saikawa, Ghosn's successor-turned-accuser, lost his job less than a year later over his own overcompensation scandal.