(Bloomberg) — The U.S. economy is in fine fettle and is operating at or close to the Federal Reserve’s twin goals of maximum employment and price stability, Vice Chairman Richard Clarida said.
“The U.S. economy is in a very good place,’’ he said Friday in the text of a speech to be delivered to a Hoover Institution monetary policy conference in Stanford, California. “The unemployment rate is at a 50-year low, real wages are rising in line with productivity, inflationary pressures are muted, and expected inflation is stable.’’
With short-term interest rates that the Fed controls in territory that is considered neutral for the economy, the central bank can afford to be data dependent as it assesses “what, if any, further adjustments in our policy stance might be required to maintain our dual-mandate objectives,’’ Clarida said.
The vice chairman was speaking after a blockbuster April jobs report that saw payrolls expand by 263,000 and the unemployment rate fall to 3.6 percent. That’s below the 4.3 percent mark that Fed policy makers reckon is equivalent to full employment, according to their median projection in March.
“The unemployment rate is not far below many estimates” of its natural rate, Clarida said.
In his speech, Clarida said that incoming data not only informed the Fed’s views of where the economy was headed. The data also help the central bank assess where such unobservable variables as the natural rate of unemployment stand, he said. He noted that policy makers’ assessment of that natural rate had fallen over time.
Earlier this week, the Fed held interest rates unchanged in the face of pressure from President Donald Trump to cut them.