Richard Clarida hints Fed may not raise rates as much as projected

Christopher Condon and Chibuike Oguh / Bloomberg News

WASHINGTON — Federal Reserve Vice Chairman Richard Clarida left open the possibility the U.S. central bank will raise interest rates in 2019 fewer than the two times projected by policy makers at their last meeting.

“A lot has really happened since the first week of December,” Clarida said Monday in an interview on Fox Business Network. “Some of the global growth data have been softening.”

In the so-called dot-plot released after the Dec. 18-19 meeting, the median projection from policy makers was for two rate hikes this year. Clarida, however, downplayed the significance of those individual forecasts. “We don’t vote on those dots,” he said.

Clarida said the U.S. central bank can be “very patient” as it takes a meeting-by-meeting approach to monetary policy decisions in 2019. He emphasized that Fed’s flexibility extended not only to rates, but also to the ongoing balance sheet reduction program, which also tightens financial conditions over time.

Clarida’s remarks stayed in line with the cautious message U.S. central bankers have delivered over the past two weeks, compared to the more hawkish tone they set with their Dec. 19 policy statement and forecasts for further rate hikes in 2019.

The Fed’s communications — and a Bloomberg News report that President Donald Trump had discussed firing Chairman Jerome Powell — helped bring on the worst December for stocks since the Great Depression.

Beginning the first week in January, however, several Fed officials, including Powell, have reassured investors they’re prepared to hold rates steady as they assess the impact on the U.S. economy of slower global growth and tighter financial conditions.

While acknowledging that global growth had slowed, Clarida said “it doesn’t look severe now,” and the U.S. economy was beginning 2019 with “good momentum.”

“I don’t see a recession on the horizon,” Clarida said.

Clarida said he didn’t expect the partial government shutdown, now in its 24th day, would hinder the Fed’s ability to keep tabs on the U.S. economy, despite cutting off some data reports that are prepared by affected departments.