Powell told reporters Wednesday that the Federal Open Market Committee would respond if there were a “material reassessment” of the economic outlook, but he did not spell out what would satisfy that condition.
Asked to define that phrase, Clarida stressed that the baseline outlook is for inflation to be around the Fed’s 2% target, a solid labor market, and for “ongoing continued growth.” He said if the FOMC saw “accumulating evidence” that it was missing on its mandate for maximum employment or stable prices, or the growth needed to sustain both goals, “we would have to factor that in.”
“We will be data dependent,” Clarida said. “Every meeting is a live meeting.”
Fed officials worried that weakness in these sectors could leak into consumer confidence and risk the overall expansion, and the 2019 cuts were described as insurance against such risks.
The pace of consumer expenditures has slowed, but it’s still positive against the background of a solid labor market. “We don’t see the consumer cracking,” Clarida said in the interview.
This article was provided by Bloomberg News.