Fed Vice Chair Richard Clarida said in a speech yesterday that before the current downturn, long-term inflation expectations were already “at the low end” of the range that’s consistent with Fed’s objective. Give the “likely depth of this downturn”, inflation expectations are “at risk of falling below” that range.
Hence, “I will place a high priority on advocating policies that will be directed at achieving not only maximum employment, but also well-anchored inflation expectations consistent with our 2 percent objective,” he added. “Depending on the course of the virus and the course of the economy, more support from both fiscal and monetary policy may be called for,” he added.
