Fed's Clarida: Downside economic risks have diminished due to vaccine

Author: Adam Button | Category: Central Banks

Comments from the Fed vice chair

  • Vaccine news has brightened economic prospects
  • It will take some time for economy to recovery to pre-virus peak
  • Fed will use its full range of tools to aid economy
  • Pace of economic recovery moderated in the fourth quarter
  • Spending on goods is strong, services spending suppressed
  • Inflation leveled out after picking up over summer
There's a shift ongoing where the Fed has buried the idea of more stimulus and is now much more constructive.

  • Don't expects jobs setback in December to continue in 2021
  • Time to slow pace of bond buying 'well down the road'
  • Expects to keep pace of QE through 2021
  • Could see inflation above 2% due to base effects
  • Predicts inflation will finish this year above last year but still below 2% target
  • We have policy positioned exactly where we want it
  • Rates at these levels are not a concern for me
  • We have to take into account why yields are rising
Treasury yields are pushing higher again.

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