Fed's Clarida says rates won't rise just because unemployment falls

He also acknowledged that policy may have gone astray in the past by following models that were not effective in a world where lower interest rates will be the norm.

Most critically, the Fed intends to allow inflation to run higher than the traditional 2% target before it will increase short-term interest rates, which currently are anchored near zero. The purpose will be to help achieve the full employment aspect of the dual mandate. In the past, when the Fed saw unemployment falling it assumed inflation was on the horizon, and thus hiked rates preemptively.

"This change conveys our judgment that a low unemployment rate by itself, in the absence of evidence that price inflation is running or is likely to run persistently above mandate-consistent levels or pressing financial stability concerns, will not, under our new framework, be a sufficient trigger for policy action," Clarida said.

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Low unemployment alone not enough to justify Fed rate hikes, Clarida saysThe Federal Reserve's new approach to monetary policy means a low unemployment rate on its own doesn't warrant higher interest rates, a 'robust' change meant to acknowledge the economy is different than that of textbook models,' Fed Vice Chair Richard Clarida said on Monday. Next policy steps: print another couple of trillion. Who's a bigger dweeb, Clarida or Kashkari?
Source: Reuters - 🏆 2. / 97 Read more »

Low unemployment alone not enough to justify Fed rate hikes, Clarida saysThe Federal Reserve's new approach to monetary policy means a low unemployment rate on its own doesn't warrant higher interest rates, a 'robust' change meant to acknowledge the economy is different than that of textbook models,' Fed Vice Chair Richard Clarida said on Monday. Next policy steps: print another couple of trillion. Who's a bigger dweeb, Clarida or Kashkari?
Source: Reuters - 🏆 2. / 97 Read more »