Clarida Says Fed Will ‘Act as Appropriate’ to Sustain Expansion

(Bloomberg) -- Federal Reserve Vice Chairman Richard Clarida said many U.S. central bankers see a stronger case for easier monetary policy relative to the outlook just two months ago.

“We will certainly act as appropriate to put in place policies that sustain the economic expansion, and the strong labor market and price stability,” Clarida said at a Bank of Finland conference in Helsinki on Monday. He cited mounting uncertainty for global trade and growth, and investment plans by U.S. businesses.

U.S. central bankers left the benchmark lending rate unchanged at their June 18-19 meeting, while pivoting toward a rate cut. The central bank said in its statement that “uncertainties’’ about the outlook have increased and that it will “closely monitor’’ incoming information.

President Donald Trump subsequently relaunched his attacks on the Fed, comparing it to a “stubborn child” and reiterating that he has the right to demote or fire Chairman Jerome Powell. He even went so far as to say the U.S. should have European Central Bank President Mario Draghi “instead of our Fed person.”

Policy makers are next scheduled to meet July 30-31, when they are widely expected by investors to cut interest rates, with some looking for a 50 basis-point move. A key metric to watch will be the jobs report on Friday.

“The U.S. economy is in a good place in terms of lower unemployment rate and the inflation rate a little bit below our 2% objective,” Clarida said. “The baseline outlook for the U.S. economy continues to be a positive one where the committee sees growth at or slightly above trend, sees the unemployment rate remaining low and the inflation rate rising gradually toward 2%.”

When conducting the Beige Book surveys with business leaders, “we are hearing increasing references and mentions of uncertainty about policy, and particularly uncertainty about the outlook for trade negotiations, having a potential impact on business investments,” he said.

To contact the reporters on this story: Kati Pohjanpalo in Helsinki at kpohjanpalo@bloomberg.net;Carolynn Look in Frankfurt at clook4@bloomberg.net

To contact the editors responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net, Paul Gordon, Brian Swint

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