Fed's Clarida Says Economy's Path Tied to Efforts to Deal With Pandemic
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
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
"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
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 firstname.lastname@example.org
(END) Dow Jones Newswires
July 07, 2020 17:00 ET (21:00 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.