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.