Clar­ida Says `Pow­ell Put’ Is Not a Use­ful Con­cept

The Bond Buyer - - Market News -

Fed­eral Re­serve Vice Chair­man Richard Clar­ida said the U.S. cen­tral bank will de­fend both sides of its in­fla­tion tar­get and cau­tioned in­vestors against think­ing the Fed would act to halt a sharp mar­ket de­cline.

“I don’t re­ally think of it as a use­ful way to de­scribe what the cur­rent Fed­eral Re­serve is do­ing,” he said Mon­day when asked about the con­cept of a “Pow­ell put” in an in­ter­view on Bloomberg Tele­vi­sion.

Clar­ida, who took his post in Septem­ber, said the Fed would tol­er­ate in­fla­tion ris­ing slightly above its stated 2% tar­get for in­fla­tion.

“We have a sym­met­ric ob­jec­tive around 2%,” he said. “Two per­cent is not meant to be a ceil­ing. We’ve op­er­ated be­low 2%, we could op­er­ate some­what above 2%, de­pend­ing on the shocks.”

He added, how­ever, that the Fed has been more fo­cused in re­cent years on pre­vent­ing in­fla­tion from fall­ing be­low its tar­get than drift­ing above.

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