MNI: Clarida Says Appropriate For Fed To Tighten This Year

Federal Reserve Vice Chair Richard Clarida said Thursday that starting policy normalization this year is consistent with the central bank's flexible average inflation targeting framework given the current outlook.

Clarida said there's still some evidence that last year's jump in prices will fade once supply bottlenecks are resolved. "I continue to believe that the underlying rate of inflation in the U.S. economy is hovering close to our 2 percent longer-run objective," he said. The jump in relative prices "will in the end prove to be largely transitory under appropriate monetary policy."

Earlier this week, Clarida, who led the Fed's framework review, announced his intention to resign on Friday. Writing in a working paper he said "even as the economy we face now looks different than when we set out to do the framework review, we think the new framework is set to serve us well."

"While supply and demand imbalances related to the pandemic and the reopening of the economy are contributing to elevated levels of inflation at the moment, several of the factors that motivated the review still stand, including the substantial decline in estimates of the neutral real interest rate," he said.