Fed Vice Chair Richard Clarida, Trump latest addition to the Federal Reserve Board, delivered his first public speech yesterday. And he backs further rate hike by Fed. He said, “if the data come in as I expect, I believe that some further gradual adjustment in the federal funds rate will be appropriate.”
Clarida also noted that “even after our September decision (a 25bps hike), I believe U.S. monetary policy remains accommodative.” He pointed out that ‘the funds rate is just now–for the first time in a decade–above the Fed’s inflation objective”. However, “inflation-adjusted real funds rate remains below the range of estimates for the longer-run neutral real rate, often referred to as r*.”
Additionally, he also noted that “if strong growth and robust employment gains were to continue into 2019 and be accompanied by a material rise in actual and expected inflation, that circumstance would indicate to me that additional policy normalization might well be required beyond what I currently expect.”
