Fed Vice Chair Richard Clarida gave a speech at a symposium in France today. There he noted that the US economy’s integration with the rest of the word has risk substantially over the past 60 years. That heightened US exposures to external shocks through channels of direct trade links, foreign exchange markets and contagion in financial markets.
Clarida added recently, US and other financial markets are “attuned to a number of prominent downside global risks”, including Brexit, a sharp slowdown in growth and trade tensions. He noted that Fed policymakers can “hardly ignore these risks”. Indeed, he pointed out three of the most recent FOMC statements have highlighted concerns about global economic and financial developments.
He also reiterated Fed’s stance that “in the presence of these risks and with inflation pressures muted, we can afford to be patient and data dependent as we assess in future meetings what adjustments in our policy rate might be necessary to sustain growth, employment, and price stability in the U.S. economy.”
