Fed’s Clarida Says FOMC Still Monitoring Asset Purchases

Federal Reserve Vice Chairman Richard Clarida, in a speech Monday about the central bank’s new policy framework, provided no hint that he supported changing the Fed’s current asset-purchase program.

“At our November FOMC meeting, we discussed our asset purchases and the critical role they are playing in supporting the economic recovery,” Clarida said in the text of remarks he’s scheduled to deliver in an online event organized by the Brookings Institution.

Fed’s Clarida Says FOMC Still Monitoring Asset Purchases

“Looking ahead, we will continue to monitor developments and assess how our ongoing asset purchases can best support achieving our maximum-employment and price-stability objectives,” Clarida said, repeating the non-committal guidance Fed Chair Jerome Powell offered following the Nov. 4-5 meeting of the Federal Open Market Committee.

Earlier Monday, economists at JPMorgan Chase & Co. projected the Fed will decide at its Dec. 15-16 meeting to extend the maturity of its $80 billion monthly purchases of U.S. Treasuries in order to reduce longer-term yields.

Fed officials left interest rates unchanged near zero and made no change to their asset purchases at the November gathering. The Fed is currently buying about $120 billion in Treasuries and mortgage-backed bonds every month, partly aimed at lowering borrowing costs for businesses and households.

Powell, at his post-meeting press conference, said the central bank could shift the composition, duration, size or the life cycle of the program to provide more stimulus to the economy.

Clarida didn’t comment on his economic outlook in the text of the speech. Infection rates are soaring across much of the country, prompting a new wave of restrictions. At the same time, drug companies are reporting positive results as they test potential vaccines against the virus, raising the prospect for a brighter outlook later next year.

Clarida did offer his views on how the Fed may eventually calibrate the pace of rate increases once conditions satisfy the Fed’s thresholds for lifting off zero. The Fed has said it will begin raising rates once inflation has reached 2%, is on track to “moderately” exceed 2% “for some time” and the labor force has reached maximum employment.

“What ‘moderately’ and ‘for some time’ mean will depend on the initial conditions at liftoff,” Clarida said. “Crucially, the Committee’s judgment on the projected duration and magnitude of the deviation from the 2% inflation goal will, at the time of liftoff and every three months thereafter, be communicated in the quarterly Summary of Economic Projections for inflation.”

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.