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Fed Vice Chairman Richard Clarida
The recent run-up in the 10-year Treasury yield is not a worrisome sign for the economy, said Fed Vice Chairman Richard Clarida on Monday.
“I can say for myself I was not concerned,” Clarida said, during a conversation at the Brookings Institution.
He said the yield around 90 basis points was still “accommodative” or boosting the economy.
“You consider the range that it’s in, and it’s certainly still a very accommodative range,” he said.
The yield on the 10-year Treasury note TMUBMUSD10Y, 0.904% has risen above 0.90% in recent days from an August low of 0.50%. That’s still within a months-long trading range.
During his talk, Clarida said the Fed was not out of ammunition to help the economy if it slows down in coming months.
“We do think our tool kit is amply stocked,” Clarida said.
He spoke mainly in terms of the central bank’s bond-buying program, also called quantitative easing.
The Fed is buying $120 billion per month in Treasurys and mortgage-backed securities to maintain stable financial markets and help the economy grow. The Fed has increased its Treasury and mortgage-backed securities holdings by a total of $3.2 trillion since March.
The Fed could adjust the composition, pace and “life-cycle” of the purchases if need be, he said.
Fed Chairman Jerome Powell and Clarida said Fed officials had a lengthy discussion about its asset purchase plan at their two-day meeting early this month. Clarida said the Fed was happy with the current stance of Fed policy.
“We like the way that policy is calibrated, but we will continue to monitor developments and assess the outlook, and we’ll make adjustments as needed,” Clarida said.
The next Fed interest-rate committee meeting is set for Dec. 15-16.
The Fed’s No. 2 official said he thought that the economy would need more government spending to help it recover but quickly added he would leave the important details of any fiscal package to Congress.
Hopes are dimming that Congress will pass a fourth stimulus for the economy before President-elect Joe Biden takes office on Jan. 20.
Clarida said the economy went into the fourth quarter with “very solid” momentum. News of the two successful trials for cornavirus vaccines gives him confidence in the recovery from the pandemic can be much more rapid from the last recession.
