Fed's Clarida 'Surprised' by Inflation Report, But Stresses Need to See More Data -- Update
By Paul Kiernan
WASHINGTON -- A top Federal Reserve official said on Wednesday
he was surprised by a larger-than-expected jump in inflation last
month, but stressed that more data would be necessary for the
central bank to begin scaling back its easy-money policies.
"I was surprised," Richard Clarida, the Fed's vice chairman,
said of the 4.2% increase in consumer prices in April from a year
earlier. "This number was well above what I and outside forecasters
Mr. Clarida said he believes most of the recent acceleration in
prices will prove transitory as the economy works through supply
and demand mismatches that emerged during the pandemic. But he
added that policy makers will be monitoring measures of long-term
inflation expectations "very closely" and will act if they start to
"If, contrary to our baseline view, demand relative to supply
was excessive and persistent and pushed up inflation and inflation
expectations to levels that were not potentially consistent with
our mandate," Mr. Clarida said, "we would not hesitate to act and
to use our tools to bring inflation back down to our 2% longer-run
Since last year, the Fed has held overnight interest rates near
zero and purchased at least $120 billion a month of Treasury and
mortgage bonds to smooth the economy's recovery from the recession
caused by the Covid-19 pandemic.
Some economists say those policies, combined with trillions of
dollars of fiscal stimulus enacted over the past year, are causing
demand for goods and services to outstrip supply, driving inflation
Fed officials reiterated in April their intention to leave rates
unchanged until the economy has achieved the central bank's goals
of full employment and 2% average inflation. They have said since
December they plan to continue buying assets at the current pace
until "substantial further progress" has been made toward those
objectives, a standard that Mr. Clarida said Wednesday "is likely
to take some time" to achieve.
"Right now that means focusing especially on the labor market,"
Mr. Clarida said in a virtual appearance for the National
Association for Business Economics International Symposium. He said
he was also surprised by a report last week that showed hiring in
April fell well short of expectations. The labor market's recovery
would take until late 2022 if the recent pace of job creation holds
steady, he added.
"Honestly, we need to recognize that there's a fair amount of
noise right now, and it will be prudent and appropriate to gather
more evidence," Mr. Clarida said.
Write to Paul Kiernan at email@example.com
(END) Dow Jones Newswires
May 12, 2021 12:26 ET (16:26 GMT)
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