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Fed’s Clarida Plays Down Significance of Rising U.S. Inflation

EconomyMay 12, 2021 23:35
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2/2 © Bloomberg. Richard Clarida, vice chairman of Federal Reserve System, speaks during the National Association of Business Economics (NABE) economic policy conference in Washington, D.C., U.S., on Tuesday, Feb. 25, 2020. This year's annual conference theme is 2/2

(Bloomberg) -- Federal Reserve Vice Chairman Richard Clarida played down the significance of rising inflation, saying it was due largely to transitory forces.

“Readings on inflation on a year-over-year basis have recently increased and are likely to rise somewhat further before moderating later this year,” he said in the text of remarks to be delivered to the National Association for Business Economics on Wednesday. However, “I expect inflation to return to -- or perhaps run somewhat above -- our 2% longer-run goal in 2022 and 2023.”

U.S. consumer prices climbed in April by the most since 2009, bringing the year-on-year increase to 4.2%, amid a record increase in used-car costs, the Labor Department reported on Wednesday. The news drove stock market futures prices deeper into the red.

Clarida said inflation was being boosted by base effects -- current price levels are elevated compared to depressed readings a year ago, when the economy was virtually shut down -- and by some supply bottlenecks.

He suggested that the Fed is still some ways away from scaling back the massive stimulus it is providing to the economy.

“The economy remains a long way from our goals, and it is likely to take some time for substantial further progress to be achieved,” he said.

The Fed is currently buying $120 billion of assets per month -- $80 billion of Treasury securities and $40 billion of mortgage backed debt -- and has pledged to keep up that pace “until substantial further progress” has been made toward its goals of maximum employment and 2% average inflation.

©2021 Bloomberg L.P.

Fed’s Clarida Plays Down Significance of Rising U.S. Inflation
 

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