“Commencing policy normalization in 2023 would, under these conditions, be entirely consistent with our new flexible average inflation targeting framework,” Mr. Clarida said. Because Fed officials give their estimates for the final quarter of each year, it is difficult to tell whether Mr. Clarida’s judgment — which seems to argue for an early-2023 rate increase — is more aggressive than that of most of his colleagues. But he is the highest-ranking official yet to set out a possible timeline for lifting interest rates, since the Fed chair, Jerome H. Powell, has repeatedly said it is not yet time to discuss raising the federal funds rate. Rate increases are a question for next year, but the Fed is more immediately considering when and how to change its approach to its other monetary policy tool: big bond purchases. Officials are discussing slowing down their $120 billion in monthly purchases now.

Source: New York Times August 04, 2021 14:42 UTC