October 18, 2019 / 3:37 PM / in 4 months

Fed's Clarida says officials will act 'as appropriate' to sustain economy and address risks

BOSTON (Reuters) - Federal Reserve Vice Chairman Richard Clarida reiterated his stance that the U.S. central bank will “act as appropriate” to extend the recovery and shield the economy from risks posed by geopolitical tensions and slowing global growth.

FILE PHOTO: Federal Reserve Vice Chair Richard Clarida reacts as he holds his phone during the three-day "Challenges for Monetary Policy" conference in Jackson Hole, Wyoming, U.S., August 23, 2019. REUTERS/Jonathan Crosby

“Looking ahead, monetary policy is not on a preset course, and the committee will proceed on a meeting-by-meeting basis to assess the economic outlook as well as the risks to the outlook,” Clarida said at an event organized by the CFA Institute. “It will act as appropriate to sustain growth, a strong labor market, and a return of inflation to our symmetric 2 percent objective.”

His remarks, which were likely his last public comments before the next Fed meeting on Oct 29-30, were in line with those of other policymakers who emphasized this week that they are open-minded about future policy decisions.

Fed officials voted 7-3 in September to cut interest rates for the second time this year, bringing the target rate to a range of 1.75% to 2.00%. Investors are pricing in a nearly 90% chance that the Fed will lower rates by a quarter percentage point later this month.

Clarida also said Fed officials are keeping an eye on risks that threaten to slow economic growth, including a decline in business investment, a slowdown in global growth and below-target inflation. He said that after a “strong” first quarter and “decent” second quarter, he expects growth to slow in the second half of the year.

Clarida also said the economy is in a “good place,” boosted by an unemployment rate near 50-year lows and rising wages. Many Fed policymakers, including Clarida, have previously noted that the strength of the U.S. consumer will be key in charting the course of interest rates.

On Friday, Clarida said consumers so far appear to be in good shape, with household debt levels low and consumption still on pace to grow by 2.5% this year.

“I don’t see any evidence right now that recession risks are elevated,” he said. “And I don’t see that spilling into the consumer.”

When asked about the inverted yield curve, which has recently reverted to positive, Clarida said that he does pay attention to it. But he said that the indicator reflects concerns about growth slowing across the globe.

“A big part I think of the inversion that we got really was not saying so much about the U.S. as it was saying something about the global economy,” he said.

Reporting by Jonnelle Marte; Editing by Chizu Nomiyama

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