Fed's Vice Chair says bank's actions have bought time for economy
Richard Clarida believes the economy will grow and the unemployment rate will start to fall
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WASHINGTON - The Federal Reserve's actions so far have helped buy time for the U.S. economy through looser financial conditions, though that could be threatened if the coronavirus pandemic and related downturn persist, Fed Vice Chair Richard Clarida said on Thursday.
"The easing of financial conditions is buying some time until the economy can begin to recover," Clarida said in outlining the impact he sees from Fed programs announced so far to support financial, corporate bond, and other markets. "Whether it proves to be durable will depend importantly on the course that the coronavirus contagion takes and the duration of the downturn that it causes."
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Clarida, in prepared remarks for a webcast appearance organized by the New York Association for Business Economics, said it remained difficult to predict the course of the economy because of the "wide range of scenarios" that could unfold depending on the success of efforts to control the virus.
He said he felt the crisis at this point would hit demand more than supply, and slow the rate of inflation rather than increase it.
The health crisis will "be disinflationary, not inflationary, and the data we are seeing so far are consistent with this projection," Clarida said.
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Clarida said he nevertheless believes the economy will grow and the unemployment rate start to fall beginning in the second half of this year.
He joined recent calls by Fed officials, including Chair Jerome Powell, to do more if necessary, and suggested that more fiscal spending may be needed as well.
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But Fed actions to date have been helping. The slowing of Fed Treasury purchases in recent weeks, for example, are "reflecting the substantial improvement in market functioning."
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