MNI BRIEF: Fed Attuned to Inflation Risk Case - Clarida

The recent surprisingly strong U.S. inflation readings are "mostly transitory" and given that the US labor market is down "more than 8 million jobs," the Federal Reserve will continue to provide easy monetary policy, the bank's Vice Chair Richard Clarida said Monday. "My baseline view is that most of this is likely to be transitory, but we have to be attuned and attentive to the incoming data," he Clarida at an Atlanta Fed's Financial Markets Conference Q&A session, adding he sees the economy growing 6.5%-7% this year.

Clarida said as demand outruns supply and come into balance inflation will run over the central bank's 2% target for some time. He added that the Fed would use its tools to address signs of "upward pressure on prices or inflation that threaten to put inflation expectations higher", stressing that such an outcome was not his baseline view, but a risk case that needed careful watching.

"I also believe that it may take more time to reopen a USD20 trillion economy than it did to shut it down," he said, suggesting a jobs recovery could take longer. Fed advisers have told MNI payrolls growth could be subdued for months as matches between employers and employees take time.