Fed’s Clarida: Gradual taper concluding mid-2022 may soon be warranted

Comments from the Fed vice chair

Comments from the Fed vice chair
  • Risks to inflation are to the upside
  • Fed would react to persistent upside move in inflation expectations but that isn’t happening now
  • Decision on pace of asset purchases won’t be intended to carry signal about timing of rate hikes
  • Labor market progress has been notable
  • Inflation running ‘well above’ moderate overshoot of 2% goal
  • This year’s unwelcome inflation surge will be largely transitory
  • Bar for taper on inflation ‘more than’ met while on employment it’s ‘all but met’
This is similar to his September speech.
  • The big unknown is how long it will take bottlenecks to be resolved
  • There is a flavor of stagflation right now
  • Stagflation is not my baseline case and I don’t think it will be the trend going forward
  • Delta has complicated the signal on the labor market
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