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Fed Vice Chairman Richard Clarida: We Could Cut Rates if Growth Outlook Worsens

May 30, 2019

We Crunch the Numbers, You Make the Trade.We Crunch the Numbers, You Make the Trade.
We Crunch the Numbers, You Make the Trade.We Crunch the Numbers, You Make the Trade.

 

The Vice Chairman of the Federal Reserve Richard Clarida commented today on what scenario could induce the Fed to cut rates.

He said:

  • "Let me be clear, we are attuned to potential risks to the outlook"
  • "And if we saw a downside risk to the outlook, then that would be a factor that could call for a moe accomodative policy"
  • Clarida said the Fed reaffirmed its policy stance at the last meeting because it believes the inflation weakness it's seeing is temporary
  • He made his comments as the US Treasury market is flashing warning signs with an inverted yield curve that has preceded every recession for the last 50 years
  • Clarida mentioned the yield curve, saying its inversions of late have been short-lived, not the extended inversions that are more indicative of recessions
  • Clarida did not indicate there is presently any changes being considered to the Fed stance
  • He added, though, "if the incoming data were to show persistent shortfall in inflation below our 2% objective, or were it to indicate that global economic and financial developments present a material downside risk to our baseline outlook" then the Fed would likely need to reassess its stance 
  • Clarida highlighted the possibility that the US economy could grow with stables price at a lower unemployment rate without sparking inflation than the Fed presently assumes-the Fed lowered that unemployment threshold to 4.3% from 4.7% 2 years ago, but he speculated that number may even be below 4% 

 

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