Don't Fight the Fed

Consuelo Mack continues her series on the Fed with this week's interview with the former Fed  Vice Chair Richard Clarida.  Contrary to a former segment with Paul Volcker criticizing the 2% inflation target, Clarida defends it discussing the Fed's tightening and the prospects for recession.  Enjoy this balmy weekend.   

 

February 16, 2023

Dear WEALTHTRACK Subscriber,

As part of our ongoing “Don’t fight the Fed” theme, we are revisiting a recent, invaluable interview with former Vice Chairman of the Federal Reserve, Richard Clarida, who is emphasizing the importance of the central bank’s strong commitment to reducing inflation to 2%.   

Legendary Fed Chairman Paul Volcker was highly critical of the Fed’s policy of targeting 2% inflation, writing in his autobiography, Keeping At It, that he saw “no theoretical justification” for it and that if successful it “would mean the price level doubles in little more than a generation.” In our exclusive EXTRA interview, which will be available this weekend on WEALTHTRACK.com, Richard Clarida defends the 2% solution. 

In case you missed Clarida’s longer interview previously on WEALTHTRACK here are his impressive credentials. An influential expert on Fed policy in practice and theory, he was Vice Chairman of the Federal Reserve under Fed Chairman Jerome Powell from 2018 until 2022. He is now Global Economic Advisor at PIMCO which he rejoined upon leaving the Fed, having worked at the bond giant in similar roles since 2006. Clarida is also a professor of economics and international affairs at Columbia University.

Clarida is credited with coining the phrase “New Neutral” at PIMCO in 2014, predicting that short-term interest rates would remain lower for longer. He is also a key architect of the Fed’s new policy framework of targeting an average inflation rate of 2% over time, which allowed the Fed to tolerate modestly higher rates of inflation rather than preemptively raising rates to prevent it.  

In this weekend’s episode Clarida will discuss a range of topics including his confidence that the Fed will continue to tighten, or as Chair Jay Powell put it last year, “Keep at it until the job is done,” the prospects for recession and the investment impact of the Fed’s current policies.

If you miss the show on public television, you can watch it on our website over the weekend, along with our past programs and our guests’ One Investment recommendations.  You can also find the WEALTHTRACK podcast on Stitcher and SoundCloud as well as iTunes and Spotify.

Have a happy President’s Day weekend and make the week ahead a healthy, profitable and productive one.

Best regards,

Consuelo