MNI POLICY: Fed's Clarida Says 2020 Beginning In A Good Place

By Evan Ryser

     WASHINGTON (MNI) - Federal Reserve Vice Chairman Richard Clarida said the

current stance of monetary policy will remain steady, supporting solid labor

markets and growth as the economy begins the year in a good place. 

     Clarida, speaking at the Council on Foreign Relations in New York City,

said as long as incoming information about the economy remains broadly

consistent with an outlook of solid growth, unemployment at 50-year lows, and

inflation close to the 2% objective, "the current stance of monetary policy will

likely remain appropriate." 

     The Fed official, however, noted that there is no evidence to date that a

strong labor market is putting excessive cost-push pressure on price inflation,

while inflation expectations "have moved lower and reside at the low end of a

range I consider consistent with our price-stability mandate."  

     After lowering the policy rate at their three previous meetings to guard

the United States economy from the effects of trade tensions, a global slowdown,

and low inflation, Fed officials in December indicated comfort with leaving

monetary policy on hold while keeping an eye on risks and to help bring

inflation and inflation expectations back up. 

     -- REPO OPERATIONS

     Clarida also indicated that the Fed's Treasury bill purchases and both

overnight and term repurchase operations were successful in relieving pressures

in the repo markets over the year-end, and "it may be appropriate to gradually

transition away from active repo operations this year as T-bill purchases supply

a larger base of reserves." 

     "Some repo might be needed at least through April, when tax payments will

sharply reduce reserve levels," Clarida said. 

     The Fed announced and began a program of Treasury bill purchases and repo

operations in October after spikes in the overnight lending markets in

September. 

--MNI Washington Bureau; +1 202 371 2121; email: evan.ryser@marketnews.com

[TOPICS: MMUFE$,M$U$$$,MT$$$$]