MNI POLICY: Fed's Clarida Says Downside Risks Have Declined

The risk of further deterioration in the U.S. economy appears to have ebbed as vaccine distributions and new fiscal stimulus measures support a brightening outlook, Federal Reserve Vice Chair Richard Clarida said Wednesday.

"Prospects for the economy in 2021 and beyond have brightened and the downside risk to the outlook has diminished," Clarida said in prepared remarks ahead of a virtual presentation to the U.S. Chamber of Commerce.

Clarida did not directly discuss the outlook for monetary policy, but rather reviewed recent changes to the Fed's framework and its new forward guidance. Still, he offered no hints that the central bank might be considering any pullback in its strong monetary support for the economy, which include near-zero interest rates and monthly bond buys of USD120 billion.

"While our interest rate and balance sheet tools are providing powerful support to the economy and will continue to do so as the recovery progresses, it will take some time for economic activity and employment to return to levels that prevailed at the business cycle peak reached last February," Clarida said.

"We are committed to using our full range of tools to support the economy and to help ensure that the recovery from this difficult period will be as robust and rapid as possible."