By Jonnelle Marte
Jan 13 (Reuters) – Beginning to normalize monetary policy this year would be “totally consistent” with the Federal Reserve’s new average inflation targeting framework, central bank Vice President Richard Clarida said in a document released Thursday.
Clarida said she expects the labor market to reach maximum employment by the end of 2022 if the unemployment rate falls to 3.5%.
“Given this scenario and as long as inflation expectations remain well anchored in the long-term goal of 2% (…) to begin the normalization of monetary policy in 2022 would, under these conditions, be fully consistent with our new flexible framework of average inflation targets, “Clarida wrote.
He also assured that he hopes that the “unwanted” inflationary surge that began last year “will finally prove to be largely transitory under proper monetary policy.”
He said he believes the core inflation rate is close to the long-term target of 2% and that pressures may diminish as bottlenecks in the supply chain are eased.
The official announced this week that he will resign on Friday, two weeks before the end of his term.
His resignation followed reports that he corrected his previous financial disclosure late last month to show that he sold a stock fund and then quickly bought it back shortly before the Fed announced a series of rescue efforts to stem the economic fallout from the coronavirus pandemic.
(Report by Jonnelle Marte, Edited in Spanish by Manuel Farías)