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Vice Chair Clarida: If economy slows, Fed will implement policy to keep it in a 'good place'

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Fed Vice Chair Richard Clarida on tariff impact, rethinking policy

Federal Reserve Vice Chairman Richard Clarida said the economy is in a good place but he and his fellow central bankers are willing to take action if conditions change.

"We will put in policies that need to be in place to keep the economy, which is in a very good place right now, and it's our job to keep it there," he told CNBC's Steve Liesman in a live interview from a Fed conference in Chicago.

Clarida spoke as financial markets anticipate at least two interest rate cuts before the end of the year. The Fed's most recent forecast is to leave rates unchanged, but recent pressures from the escalating trade war and turbulence in the bond market have goosed market expectations.

Though noncommittal about the future of rates, he said he will be watching current conditions, in particular the trade war and the inverted yield curve in the bond market, for clues about where the Fed should go next.

If conditions change, he said that would influence his decision-making.

In particular, he addressed the issue of an insurance rate cut, done as a preventive measure to get ahead of a slowdown.

"I'm not going to look into a crystal ball. I will look into the past," Clarida said. "That has been in the monetary policy toolkit in the past."

The remarks came at a conference in which the Fed is soliciting input on the tools it uses to carry out its dual mandate of full employment and price stability, as well as how it communicates its actions.

Earlier in the day, Fed Chair Jerome Powell said policymakers are watching trade and other developments, and are committed to do what's necessary to keep the economic expansion going.