Clarida: Watching Inflation Expectations Closely

Fed Vice Chair Clarida causing a bit of a stir with his post-inflation comments this morning that the Fed doesn't have "unlimited tolerance" for inflation; that it "won't hesitate to act" if inflation expectations become unanchored; and that he'll be watching long-term inflation expectation measures very closely.

• These comments have been seen as hawkish, but he's spending a lot of time in dove mode too, rationalizing the huge upside surprise in the CPI report (and playing up the downside miss in the jobs report, suggesting continued emphasis on the employment mandate).
• Re Clarida's comments on market-implied inflation breakevens (5Y5Y) showing evidence of "transitory" price pressure expectations, and expectations in general, worth noting his comments of April 14 that his go-to metric for taking action is the Fed's new index of Common Inflation Expectations (CIE) which is released quarterly, last 2.01%:
• "Any monetary policy that we are going to bless is never going to eliminate all inflation volatility. Inflation itself is always going to move around. The metric of success is longer run inflation expectations well anchored...[if the CIE were to] "drift up persistently...that would indicate to me that policy would need to be adjusted."