Fed Vice Chair Richard Clarida said in a speech that the US economy is “operating at or close to maximum employment and price stability.” But, “although the labor market is robust, there is no evidence that rising wages are putting excessive upward pressure on price inflation”. Wages growth is “broadly in line with productivity growth and underlying inflation”.

He added that Fed’s monetary policy framework review seek to answer three questions:

• Can the Federal Reserve best meet its statutory objectives with its existing monetary policy strategy, or should it consider strategies that aim to reverse past misses of the inflation objective?
• Are existing monetary policy tools adequate to achieve and maintain maximum employment and price stability, or should the toolkit be expanded? And, if so, how?
• How can the FOMC’s communication of its policy framework and implementation be improved?

Clarida’s full speech here.

In the testimony to Joint Economic Committee, Fed Chair Jerome Powell said the baseline outlook is “favorable”. And current monetary policy stance will remain appropriate as long as the outlook is unchanged.

On the economy, Powell said “my colleagues and I see a sustained expansion of economic activity, a strong labor market, and inflation near our symmetric 2 percent objective as most likely”. But “noteworthy risks to this outlook remain”, including sluggish growth abroad and trade developments. Inflation pressures “remain muted” and long-term inflation expectations are at the “lower end of their historical ranges”.

Nevertheless, he added “we see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook”. “if developments emerge that cause a material reassessment of our outlook, we would respond accordingly”. But he emphasized “policy is not on a preset course”.

Full speech here.