Fed's Clardia: YCC is not something under active consideration

The Federal Reserve will use a broad set of employment measures including the labour force participation rate to determine when the economy has returned to “maximum employment,” part of an aggressive new approach to repairing the US jobs market, Fed Vice Chair Richard Clarida said on Monday.

In additional comments, he explained that the pandemic levelled an unprecedented blow to the economy, which is in a deep hole, ''and we're starting to dig out''.

He explained that he would push back against assertions that Federal Open Market Committee cannot achieve the goal of 2% inlfation.

''People often don't equate wage increases with inflation but the two often move together,'' he said. 

Clardia feels that te the recovery from the covid event was initially quite robust and that it was the interest-sensitive sectors powering the recover which makes it evident that the Fed's powers are effective.

However, he noted that recent data have been moving in opposite directions with the economy entering the fourth quarter with good momentum.

''Vaccine news is encouraging''.

However, he explains that the months ahead could be a challenging time for the economy.

''We think our tool kit is amply stocked.''

''We like the way policy is calibrated but will adjust as needed...and are happy with both asset purchases and guidance.''

He added that further support from fiscal policy likely to be needed, arguing that the 13-3 facilities have been very successful.

''We are just turning to discussion on expiration.''

''We're buying $80 bln of treasuries a month, equal to QE2.''

Clardia says that the financial conditions are accommodative, that the corporate bond market is functioning, capital is being allocated and that the financial system is supporting recovery.

He was not concerned by rising in 10-year yield and said that it remains in an accommodative range

Clardia said that they did examine yield curve control in review, which made sense to analyze it.

''I think it is still in the tool kit, but not something we're considering now.''

He said that the yield curve control is best seen as a complement to date-based forward guidance but it is not something under active consideration.

There has been a slight offer in the greenback over these comments wit the euro picking up on the 5-min charts to 1.1845.