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Clarida: Won't Think About Raising Rates Until Inflation Hits 2%

FED
Fed Vice Chair Clarida on Bloomberg TV, the latest on the FOMC to massage the message on recently-adopted forward guidance:
  • He says the Fed will not even think about raising rates until PCE inflation hits 2% Y/Y, and will want evidence that inflation will moderately overshoot 2% before hitting liftoff on rates. Inflation will have to spend "some time" to offset time spent undershooting.
  • In other words, once inflation gets to 2%, then the Fed can assess when to hike. They will not treat 2% as a ceiling.
  • Says that the FOMC's judgment on any overshoot will be made closer to the time.
  • Clarida reiterates that financial stability is an important consideration for the Fed, but the Fed prefers to use macroprudential etc tools to address (as per Powell's comments last week). If fin stability threatened dual mandate goals, Fed would have to take into account.
  • "Additional fiscal support will likely be needed", describes the economy as being in a "big hole" post-pandemic, despite the Fed's view that the recovery will be faster than post-2008 crisis.
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