Fed's Clarida Says U.S. Is Testing Edge of Full Employment, Price Stability
November 14 2019 - 9:30AM
Dow Jones News
By Michael S. Derby
Federal Reserve Vice Chairman Richard Clarida said Thursday that
the U.S. economy may be testing the edge of full employment, in
remarks that noted the central bank's tool kit for influencing the
economy is in a good place.
The U.S. economy is "operating at or close to maximum employment
and price stability," Mr. Clarida said. He noted that the current
jobless rate of 3.6% may be within the range of "plausible
estimates" for the lower end of the range of what constitutes full
employment.
But even as the jobless rate tests a level that should in theory
help spur higher levels of inflation, price pressures still aren't
much of an issue, the official said. His comments came from the
text of a speech he was to present at a conference held by the Cato
Institute in Washington.
"Although the labor market is robust, there is no evidence that
rising wages are putting excessive upward pressure on price
inflation," Mr. Clarida said, adding "wages today are increasing
broadly in line with productivity growth and underlying
inflation."
Mr. Clarida also noted that when it comes to where the public
sees inflation pressures going in coming years, "U.S. inflation
expectations today do reside at the low end of a range I consider
consistent with our price-stability mandate."
Mr. Clarida didn't comment on the interest-rate outlook, in
remarks that came a day after Fed Chairman Jerome Powell told
Congress that more rate cuts seem unlikely for now "as long as
incoming information about the economy remains broadly consistent
with our outlook of moderate economic growth, a strong labor
market" and stable inflation.
Much of Mr. Clarida's speech was devoted to the Fed's ongoing
review of its policy-making system. The central bank has held a
series of events around the country to solicit feedback on how well
it's helping the economy achieve its full potential. Officials are
also trying to figure out how to better conduct monetary policy in
a world where inflation has been persistently low, and short-term
rates haven't been able to rise to the levels they once did.
The low level of rates means the Fed runs a higher risk of
having to lower rates back to zero levels, where they were during
much of the financial crisis and its aftermath. Then the Fed turned
to other stimulus strategies like long-term bond buying and
explicit guidance about the future path of rates. It has been
exploring whether that regime needs an overhaul, but thus far,
officials like Mr. Clarida and others aren't hinting big changes
are to come.
"We believe our existing framework, which has been in place
since 2012, has served us well and has enabled us to achieve and
sustain our statutorily assigned goals of maximum employment and
price stability," Mr. Clarida said.
Fed officials agree the current monetary policy framework "is
flexible enough to allow the [Federal Open Market] Committee to
choose the policy actions that best support our dual-mandate
objectives in a wide variety of economic circumstances," the
official said.
In his speech, Mr. Clarida said the policy review will likely be
complete in the middle of next year.
Write to Michael S. Derby at michael.derby@wsj.com
(END) Dow Jones Newswires
November 14, 2019 09:15 ET (14:15 GMT)
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