Clarida Q&A: I was surprised by today's CPI number

Author: Adam Button | Category: Central Banks

Clarida answers questions after his speech

Clarida answers questions after his speech
  • If contrary to our baseline view, if inflation expectations are pushed up and are persistent, we would not hesitate to act
  • It may take longer to reopen a $20 trillion economy than it did to shut it down
  • We will need to be attuned to the data and following it closely
  • Says he was surprised by today's CPI report but hasn't looked through it in detail
  • CPI is one data point, as was the jobs report
  • If inflation isn't transitory, we will use our tools to bring inflation under control
  • The employment report was a downside surprise
  • At 500K jobs per month it would take until Fall 2022 to close jobs gap from pandemic
  • I will be watching labor force participation closely
  • We need to be humble with forecasts
  • I put a lot of weight on inflation surveys but I also look at financial markets
  • 5-year, 5-year forward breakevens are below longer-run rates and suggest upward price level pressures are likely to be transitory
  • There is a substantial societal benefit to getting to maximum employment
  • Sees trade deficit as a 'safety valve' on upward price pressures
  • I would take it 'very seriously' if I saw longer term inflation expectations move up
"I was surprised," Fed Vice Chair Clarida said of today's inflation report. "Obviously we have pent-up demand in the economy -- it may take some time for supply to move up to the level of demand."
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