MNI POLICY: Fed's Clarida Sees 'Evident' Risks to Good Outlook

By Jean Yung

     WASHINGTON (MNI) - Federal Reserve Vice Chair Richard Clarida on Friday

highlighted "evident risks" to a generally favorable outlook, citing weakening

global growth and a slowdown in exports, manufacturing and investment.

     The Fed will "act as appropriate" to sustain growth, a strong labor market,

and inflation rising to its objective, he reiterated on the last day before

policymakers enter a customary 13-day communication "blackout" period around a

policy meeting.

     The FOMC will convene on October 29 and 30 to decide whether to lower

interest rates a third time this year, to a range of 1.50% to 1.75%. Investors

widely anticipate such a move.

     Clarida said the FOMC continues to expect the U.S. economy to grow about 2%

next year and inflation to gradually rise toward its 2% goal. He also pointed to

unemployment at a 50-year low as an example of resilience in the economy.

"Despite this favorable baseline outlook, the U.S. economy confronts some

evident risks," he said.

     "Business fixed investment has slowed notably since last year, exports are

contracting on a year-over-year basis, and indicators of manufacturing activity

are weakening. Global growth estimates continue to be marked down, and global

disinflationary pressures cloud the outlook for U.S. inflation," he said in

remarks prepared for a financial conference in Boston. 

     "Looking ahead, monetary policy is not on a pre-set course, and the

Committee will proceed on a meeting-by-meeting basis to assess the economic

outlook as well as the risks to the outlook," he said. 

     Separately addressing the recently announced plan to buy $60 billion of

bills a month until at least into the second quarter of 2020, Clarida said the

open market operations are "technical" and should not be conflated with

quantitative easing that was designed to stimulate the economy. 

     "The technical measures we are undertaking do not represent a change in the

stance of monetary policy, which we continue to implement by adjusting the

target range for the federal funds rate," he said. 

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

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