US interest rates are in a good place for now, but policymakers are ready to change direction if the economy needs it, the second in command at the Federal Reserve said Thursday.
Monetary policy is in a “good place” — after three rate cuts last year — and will continue to support growth, Fed Vice Chairman Richard Clarida said in a speech.
But if the economic outlook changes “we will respond accordingly.”
Clarida’s comments before the Council on Foreign Relations echo the statements by Fed chief Jerome Powell in December following the final policy meeting of 2018.
The central bank was forced to change direction, restoring some stimulus to the economy by lowering the benchmark interest rate, after a series of nine increases since 2015 as the US recovered from the 2008 global financial crisis.
“The shift in the stance of monetary policy that we undertook in 2019 was, I believe, well timed and has been providing support to the economy and helping to keep the US outlook on track,” Clarida said in his prepared remarks.
But he stressed that policy “is not on a preset course.”
“Of course, if developments emerge that, in the future, trigger a material reassessment of our outlook, we will respond accordingly.”
The Fed continues to expect the economy to grow at a modest pace, with inflation below but approaching the two percent goal, even as labor markets remain strong with unemployment at a 50-year low.