Former Fed vice chair Clarida says he thinks the FOMC rate hikes are done now

Clarida is now a Pacific Investment Management Co (PIMCO) managing director and the firm’s global economic advisor. He spoke in an interview with Bloomberg.

In brief:

  • I was in the camp
    going into the September meeting that we would likely get one
    more hike in this cycle, if really just for precautionary reasons
  • And certainly the dots at the September meeting had 12 of the 19 participants
    indicating one more hike.
  • I’m less of that view now.
    I think given that, as I said, the bond market can do some of the Fed’s job for
    it. You know, if even some of this recent
    increase were to stick, I think the Fed could well could well be done.

Clarida has also written, in more detail, on his Federal Open Market Committee (FOMC) views. Again, in brief:

  • The Fed is highly data-dependent now that its policy is well into restrictive territory.
  • The Fed’s latest estimates for U.S. growth, unemployment, and inflation in 2024 suggest a soft landing scenario of unemployment barely above neutral, and growth only modestly below trend. This was a notable shift from prior estimates and from the traditional theory that to drive down inflation reliably to target, some softening in the labor market is required.
  • The Fed’s soft landing outlook is feasible, but we see clear risks: areas of stubborn inflation along with headwinds facing a heretofore resilient consumer and economy (e.g., student loan payments resuming after a multi-year pause).
  • The Fed may be challenged to enact the additional rate hike it’s currently projecting.

Officials who have recently departed central banks manage to stay ‘in the loop’ for a period of time given their contacts. They often land juicy private sector gigs because of this.

This article was written by Eamonn Sheridan at Source