In his first public remarks since a U.S. airstrike that killed a top Iranian general last week, Federal Reserve Vice Chairman Richard Clarida said U.S. monetary policy is “in a good place” despite “significant global growth headwinds.”
Without mentioning the recent market turmoil stemming from a ramp up, then ramp down, of hostilities with Iran, Clarida said on Thursday the central bank stood ready to respond to any emerging challenges. The U.S. economy seems to have dodged, for now, last year’s threat of a recession that would have cooled housing and mortgage demand.
While Clarida didn’t cite Iran in his remarks, he referenced the possibility of “developments” changing the central bank’s stance, which is the Fed’s way of calming the markets without being specific.
The Fed “will be monitoring the effects of our recent policy actions along with other information bearing on the outlook as we assess the appropriate path of the target range for the federal funds rate,” he said in a speech to the Council on Foreign Relations in New York. “Of course, if developments emerge that, in the future, trigger a material reassessment of our outlook, we will respond accordingly.”
During a question-and-answer period, Clarida said the central bank would act quickly if it deemed a course-correction was needed.
“We need to be nimble and we need to be alert not only to U.S. but global circumstances,” he said, adding that risks to the Fed’s outlook are “skewed to the downside.”
Clarida said three consecutive cuts to the Fed’s benchmark rate last year were “well-timed” and that monetary policy is well-positioned for the new year.
Last year’s cuts have “been providing support to the economy and helping to keep the U.S. outlook on track,” Clarida said. “I believe that monetary policy is in a good place and should continue to support sustained growth, a strong labor market, and inflation running close to our symmetric 2% objective. As long as incoming information about the economy remains broadly consistent with this outlook, the current stance of monetary policy likely will remain appropriate.”
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