Fed’s Clarida backs maintaining asset purchases at current pace all year

Fed’s Clarida backs  maintaining asset purchases at current pace all year

The Federal Reserve’s monthly purchases of U.S. Treasurys and mortgage-backed bonds, designed to help the economy recover from the coronavirus pandemic and maintain financial market liquidity, should continue at the same $120 billion-per-month pace all year, said Fed Vice Chairman Richard Clarida on Friday.

“I think its well down the road when it will be appropriate to begin to slow the pace of the increase in our balance sheet,” Clarida said during a discussion with the Council of Economic Advisers.

“It could be quite some time before we would think about tapering.”

Clarida said he was speaking for himself and said “my economic outlook is consistent with us keeping the current pace of purchases throughout the rest of this year.”

Some Fed officials had speculated the economy might improve so much this year that the Fed could begin to slow, or “taper” the purchases.

Clarida said he was not concerned that the 10-year Treasury yield has risen above 1%. He noted that 10-year Treasury yields are well below the rate of inflation.

The Fed vice chairman said the decline in nonfarm payrolls in December was a setback but didn’t expect the weakness to continue into 2021.

“I think the overall picture was a little bit more balanced than the headline number which was disappointing,” he said.

The Dow Jones Industrial Average was down 84 points in late morning trading.
after the worst jobs report since April.

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