- Fed's Vice Chairman Clarida: Benefits of yield curve targeting may be modest
Market news
31 August 2020
Fed's Vice Chairman Clarida: Benefits of yield curve targeting may be modest
- Yield caps are complicated to implement and communicate
- Yield caps an option if circumstances change markedly
- Change in employment language shows that macro models "have been wrong" and that rate hikes in the absence of inflation are "difficult to justify"
- Negative rates not seen as attractive policy for U.S.
- New language on employment means a low unemployment rate “by itself” and in the absence of inflation will not be a sufficient trigger for a rate hike
- Fed debate on new policy included healthy range of views
- Fed policymakers broadly agreed that the economy had changed so much in recent years that Fed’s approach needed to change as well
- New goal of average 2% inflation over time represents aspiration and does not tether policy to any formula or rule
- Forward guidance and large scale asset purchases “have been and continue to be effective ways to support the economy"
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