Fed's Clarida emphasizes 'patient' approach to further rate hikes

  • Fed Vice Chair Richard Clarida said in a speech Thursday that the central bank should be patient and data-dependent in its approach to monetary policy.
  • He characterized 2018 growth as "robust" though he noted that a global slowdown could hit the U.S. this year.

Federal Reserve Vice Chairman Richard Clarida affirmed in a speech Thursday that the central bank will continue to let data be the guide as to whether the central bank will continue to hike interest rates in the future.

The remarks reflected recent Fed commentary that officials will take a patient approach to monetary policy.

"Given muted inflation and stable inflation expectations, I believe we can be patient and allow the data to flow in as we determine what future adjustments to the target range for the federal funds rate may be appropriate to strike this balance," Clarida said in remarks delivered at a conference in Washington, D.C.

Clarida characterized growth as "robust" in 2018 despite an expected fourth-quarter slowdown, and he said he expects 2019 to see "somewhat slower but still-solid growth."

The Fed hiked its benchmark interest rate four times in 2018 and has indicated two more increases are coming this year. However, officials recently have changed their tone and said that they'll need evidence in the data before feeling confident about any further increases.

"Going forward, we need, I believe, to be cognizant of the balance we must strike between (1) being forward looking and (2) maximizing the odds of being right given the reality that the models that we consult are not infallible," Clarida said.

His remarks also were in line with those from Fed Chairman Jerome Powell this week, who also said the U.S. economy looks good but could take a hit from a global slowdown.

"Global growth is slowing, particularly in China and Europe. Global policy uncertainty remains elevated. And financial conditions have been volatile, making efforts to extract signal from noise more challenging," Clarida said.

The Fed official spoke ahead of Thursday's GDP report, which was expected to show the U.S. economy expanding at a 1.8 percent pace in the fourth quarter.