By Michael S. Derby 

Federal Reserve Vice Chairman Richard Clarida said in a television interview that the fate of the economy is tied to what happens with the coronavirus pandemic, adding that the central bank can and will do more if it determines such action will help it achieve its job and inflation goals.

"After taking a huge hit in March and April, we did see evidence of the economy beginning to rebound in May and June, and that was very, very welcome," Mr. Clarida said Tuesday on CNN International.

But he acknowledged that cases of illness related to the virus are on the rise in the U.S., and while he didn't say what that likely means for the nation, the central bank second-in-command noted, "as we've said many times, ultimately, the course of the economy is going to depend on the course of the virus, and we're following it very closely."

Mr. Clarida didn't say it was a given that the current path of the pandemic would necessarily drag the economy down again. "It's not our base case" that the economy will suffer a double-dip recession, he said.

Mr. Clarida said the central bank has done a lot to aid the economy and will act again if needed. "We have a lot of accommodation in place; there's more that we can do, there's more that we will do, if we need to, " he said.

In terms of what else the Fed can do after pushing its short-term rate target to near-zero levels, ramping up bond buying and launching facilities to extend credit to the broader economy and financial system, Mr. Clarida said the central bank can do more with its guidance about the future direction of interest rates and expand its bond buying, if needed.

When it comes to the Fed balance sheet, now at $7 trillion, Mr. Clarida said, "there's no limit to how much we can purchase in terms of Treasurys."

Mr. Clarida also said in response to a question about the ebullience of the stock market despite a still challenging economic outlook, that the central bank is focused on its economic mandates.

"Our focus is not really on any particular market. It's on getting the economy back to full employment and price stability as soon as possible, " Mr. Clarida said. "Obviously, our policies work through financial markets, and our focus is not on any one market."

Mr. Clarida spoke on the same day as several of his colleagues also weighed in on the economy. Speaking earlier Tuesday, Federal Reserve Bank of Richmond President Thomas Barkin said he believes the conditions are in place for a good rebound.

The economy now has in place "unprecedented levels of monetary and fiscal support" to power a recovery and "once people are comfortable re-engaging, there's a real potential that that money can get spent," he said in a video appearance.

Mr. Barkin, who is not a voting member of the rate-setting Federal Open Market Committee, also said, "I do hear positive momentum from many of my contacts, and you do see positive data," even as he cautioned people to look at the levels of data and not the rate of change.

Speaking on CNBC Tuesday, Cleveland Fed leader Loretta Mester said the health situation is starting to cause issues for the economy. She said that when it comes to economic activity, "over the past week or so, there's been some leveling off, and I think it's probably due to the increase in cases not only in Ohio but across the country."

Ms. Mester, who holds a vote on the FOMC this year, also said, "I think it's going to be a long road back to where we were in February," before the pandemic took off in the U.S.

Write to Michael S. Derby at michael.derby@wsj.com

(END) Dow Jones Newswires

July 07, 2020 17:00 ET (21:00 GMT)

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