Clarida, Richard H (1957- )

More stories

  • 88 Shares199 Views

    in Economy

    Inflation Expectations Climb, Dogging Federal Reserve Officials

    by

    A key measure of inflation expectations released on Tuesday showed continued acceleration, a survey that came as Richard H. Clarida, the Federal Reserve’s vice chair, indicated that central bankers were alert to the risk of high inflation.The combination underscored that the threat of a longer period of rising prices has become more pronounced.In remarks prepared for the Institute of International Finance’s annual meeting, Mr. Clarida said he believed that the “unwelcome” jump in inflation this year, “once these relative price adjustments are complete and bottlenecks have unclogged, will in the end prove to be largely transitory.”“That said, I believe, as do most of my colleagues, that the risks to inflation are to the upside, and I continue to be attuned and attentive to underlying inflation trends,” he added, “in particular measures of inflation expectations.”Fed officials received bad news on inflation expectations Tuesday morning. The Federal Reserve Bank of New York’s Survey of Consumer Expectations showed that medium-term inflation expectations — those for three years ahead — climbed to 4.2 percent in September from 4 percent in August. That is the highest since the series started in 2013. Short-term expectations jumped to 5.3 percent, also a new high.Central bankers have said for months that they expect this year’s rapid inflation to fade as consumers and businesses get back to normal because it is the product of surging demand when supply is struggling to catch up thanks to factory shutdowns and shipping bottlenecks. But it has become increasingly clear that the adjustment will be measured in quarters and years rather than weeks and months, and policymakers have increasingly braced for the possibility that quick price gains could last considerably longer than they had first anticipated.Even so, Mr. Clarida and his colleagues at the Fed are moving only gradually to remove their support from the economy, cognizant that millions of jobs are still missing compared with before the pandemic. The Fed signaled in its latest policy decision that it would soon begin to taper its large monthly asset purchases, which it has been using to keep many types of borrowing cheap.Mr. Clarida reiterated that belief on Tuesday, saying Fed officials “generally view that, so long as the recovery remains on track, a gradual tapering of our asset purchases that concludes around the middle of next year may soon be warranted.” But even once that process gets going, interest rates are expected to remain near zero for months or even years.Still, the Fed is staring down a challenging 2022, a year when it may have to decide whether it can keep rates near rock bottom while inflation is taking time to fade. Officials are still hoping price gains will slow to more normal levels, allowing them to be patient in removing policy support. More

  • 125 Shares99 Views

    in Economy

    How the Stimulus Could Power a Rebound in Other Countries

    by

    As Americans buy more, they are expected to spur trade and investment and invigorate demand for German cars, Australian wine, Mexican auto parts and French fashions.Washington’s robust spending in response to the coronavirus crisis is helping to pull the United States out of its sharpest economic slump in decades, funneling trillions of dollars to Americans’ checking accounts and to businesses.Now, the rest of the world is expected to benefit, too.Global forecasters are predicting that the United States and its record-setting stimulus spending could help haul a weakened Europe and struggling developing countries out of their own economic morass, especially when paired with a rapid vaccine rollout that has poised the U.S. economy for a faster recovery.As Americans buy more, they should spur trade and investment and invigorate demand for German cars, Australian wine, Mexican auto parts and French fashions.The anticipated economic rebound in the United States is expected to join China’s recovery, adding impetus to world output. China’s economy is forecast to expand rapidly this year, with the International Monetary Fund predicting 8.1 percent growth. That is good news for countries like Germany, which depends on Chinese demand for cars and machinery.Yet the United States is particularly important to the world economy because it has long spent more than it makes or sells, spreading dollars globally. China is one of the major beneficiaries of Washington’s largess because many Americans have spent their stimulus checks on video game consoles, exercise bicycles or other products made in China.The United States’ comparatively fast recovery was neither guaranteed nor expected: It was the result of a little bit of luck — new variants of the virus that have coursed through other countries have just begun to push infections higher in the United States — and a large policy response, including more than $5 trillion in debt-fueled pandemic relief spending passed into law over the past 12 months. Those trends, paired with the accelerating spread of effective vaccinations, seem likely to leave the American economy in a stronger position.“When the U.S. economy is strong, that strength tends to support global activity as well,” Jerome H. Powell, the chair of the Federal Reserve, said at a recent news conference.A year ago, it was not at all certain that the United States would gain the strength to help lift the global economy.The International Monetary Fund forecast last April that the U.S. economy might expand 4.7 percent this year, roughly in line with forecasts for Europe’s growth, after an expected slump of 5.9 percent in 2020. But the actual contraction in the United States was smaller, and in January, the I.M.F. upgraded the outlook for U.S. growth to 5.1 percent this year, while the euro area’s expected growth was marked down to 4.2 percent.Germany has extended its lockdown to April 18, and there is a good chance restrictions will be extended further.Lena Mucha for The New York TimesSince then, the U.S. government has passed a $1.9 trillion relief package, and the I.M.F. has signaled that the estimates for the country’s growth will be marked up further when it releases fresh forecasts on Tuesday.The recent relief package continues a trend: America has been willing to spend to combat the pandemic’s economic fallout from the start.America’s initial pandemic response spending, amounting to a little less than $3 trillion, was 50 percent larger, as a share of gross domestic product, than what the United Kingdom rolled out, and roughly three times as much as in France, Italy or Spain, based on an analysis by Christina D. Romer at the University of California, Berkeley.Among a set of advanced economies, only New Zealand has borrowed and spent as big a share of its G.D.P. as the United States has, the analysis found.In Europe, where workers in many countries were shielded from job losses and plunging income by government furlough programs, the slow pace of the European Union’s vaccination campaign will probably hurt the economy, said Ludovic Subran, the chief economist of German insurance giant Allianz.On Wednesday, France announced its third national lockdown as infected patients fill its hospitals.Mr. Subran also questioned whether the European Union can distribute stimulus financing fast enough. The money from a 750 billion-euro, or $880 billion, relief program agreed to by European governments in July has been slow to reach the businesses and people who need it because of political squabbling, creaky public administration and a court challenge in Germany.Karen Dynan, a former U.S. Treasury Department chief economist who is now at the Peterson Institute for International Economics, estimated that economic output would take at least a year longer to return to prepandemic levels in Europe than it would in the United States.“Fiscal policy has differed across countries in ways that are really shaping the experience they have now,” Ms. Dynan said.Vaccine supplies are limited in many developing economies, including Venezuela.Ariana Cubillos/Associated PressPoorer and smaller countries, facing severely limited vaccine supplies and fewer resources to support government spending, are likely to struggle to stage an economic turnaround even if the U.S. recovery increases demand for their exports. Places including Venezuela, Iraq and Namibia have administered only about 1 vaccine dose per 1,000 people, if that, based on New York Times data. In the United States, the rate is more than 400 doses per 1,000 people.Still, a booming American economy poses some hazard to other nations — and especially emerging markets — as economic fates diverge.Market-based interest rates in the United States are already climbing, as investors, sensing faster growth and quicker inflation around the corner, decide to sell bonds. That could make financing more expensive around the globe: If investors can earn higher rates on U.S. bonds, they are less likely to invest in foreign debt that offers either lower rates or higher risk.If the United States lures capital away from the rest of the world, “the rose-colored view that we are helping everyone is very much in doubt,” said Robin Brooks, chief economist at the Institute of International Finance.Philip Lane, chief economist of the European Central Bank and a member of the policymaking Governing Council, said the strength of the U.S. economy was generally good news for Europe. But, in an interview on Monday, he warned that rising market interest rates could be a burden for the eurozone economy.Imported goods at a cold storage port in China.Yao Jianfeng/Xinhua, via Associated Press“We do think it’s net positive for the European economy — positive for G.D.P., positive for inflation,” Mr. Lane said of the economic rebound in the United States. “But that’s based on the assumption that the increase in bond yields is very limited.” He noted that bond yields had so far risen faster than expected.Trans-Atlantic trade should get help from warmer relations between the United States and the European Union. The Biden administration has already moved to defuse trade tensions with Europe, which the Trump administration treated as an adversary. President Biden met online with European leaders last week.The U.S. stimulus packages “will be part of the water that lifts all boats,” said Selina Jackson, senior vice president for global government relations and public policy at Procter & Gamble, during a recent panel discussion organized by the American Chamber of Commerce to the European Union. “We are hoping for a calm slide out of this economic situation.”Keith Bradsher More

  • 113 Shares189 Views

    in Economy

    Larry Summers Warned About Inflation. Fed Officials Push Back.

    by

    Mr. Summers, the former Treasury secretary, and other economists say $1.9 trillion more in pandemic relief might overdo it. The Federal Reserve’s vice chair and a regional president disagreed.Federal Reserve officials pushed back on Thursday against concerns raised by two prominent economists — Lawrence H. Summers, the former Treasury secretary, and Olivier J. Blanchard, a former chief economist at the International Monetary Fund — that big government spending could overheat the economy and send inflation rocketing higher.Those warnings have grabbed headlines and spurred debate over the past two months as details of the federal government’s $1.9 trillion pandemic relief bill came together. Mr. Summers in particular has kept them up since the legislation passed, saying it was too much on the heels of large spending packages last year. He recently called the approach the “least responsible” fiscal policy in 40 years while predicting that it had a one-in-three chance of precipitating higher inflation and maybe stagflation, or a one-in-three chance of causing the Fed to raise rates and pushing the economy toward recession.But two leaders at the Fed, which is tasked with using monetary policies to keep inflation steady and contained, gave little credence to those fears on Thursday. Richard H. Clarida, the central bank’s vice chairman, and Charles Evans, the president of the Federal Reserve Bank of Chicago, both responded to questions specifically about Mr. Summers’s and Mr. Blanchard’s warnings.“They have both correctly pointed out that the U.S. has a lot of fiscal support this year,” Mr. Clarida said on an Institute of International Finance webcast. “Where I would disagree is whether or not that is primarily going to represent a long-term, persistent upward risk to inflation, and I don’t think so.”Mr. Clarida said that there was a lot of room for the economy to recover — some 9.5 million jobs that were lost during the pandemic are still gone — and that the effect of the government’s relief spending would diminish over time. He also said that while spenders had pent-up demand, there was also pent-up supply because the service sector had been shut for a year.“At the Fed, we get paid to be attentive and attuned to inflation risks, and we will be,” Mr. Clarida said. But he noted that forecasters didn’t see “undesirable upward pressure” on inflation over time.Mr. Evans told reporters on a call that he wasn’t sure what “overheating” — the danger that top economists have warned about — actually meant.“First off, there’s a conversation of is this the best way to spend money,” he summarized, adding that he didn’t have anything to say about that. “But then there’s sort of like, ‘Oh, this is so much that it is going to overshoot potential output, and there’s a risk that we’re going to get overheating, and then inflation.’”He continued: “What is the definition of overheating? It’s a great word, it evokes all kinds of images, but it’s kind of like potential output is always a strange concept anyway. Can output be too high?”Mr. Evans has been concerned for years that inflation is too tepid, rather than that it might pick up too much. Superweak price pressures can cause problems by risking price declines — which encourage saving and harm debtors — and by robbing the Fed of room to cut interest rates during times of trouble.“I kind of remember the ’70s, too,” a decade when inflation spiraled up and out of control in America, Mr. Evans said. “This isn’t the ’70s. We’ve had trouble getting inflation up.”Inflation has been weak in the United States, and in advanced economies broadly, the past two decades. To try to keep that from turning into a bigger problem, the Fed has been working to “re-anchor” consumer and market expectations to prevent inflation slipping lower. The central bank announced last year that it would begin to aim for 2 percent annual price gains on average over time, allowing for periods of greater increases.Still, no Fed policymaker wants inflation to suddenly spike, eroding consumer purchasing power. If that happened, the Fed might have to lift interest rates rapidly to slow down the economy, throwing people out of work and possibly causing a recession. That’s what Mr. Summers and Mr. Blanchard are warning about..css-yoay6m{margin:0 auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}@media (min-width:740px){.css-yoay6m{font-size:1.25rem;line-height:1.4375rem;}}.css-1dg6kl4{margin-top:5px;margin-bottom:15px;}.css-k59gj9{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-flex-direction:column;-ms-flex-direction:column;flex-direction:column;width:100%;}.css-1e2usoh{font-family:inherit;display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-box-pack:justify;-webkit-justify-content:space-between;-ms-flex-pack:justify;justify-content:space-between;border-top:1px solid #ccc;padding:10px 0px 10px 0px;background-color:#fff;}.css-1jz6h6z{font-family:inherit;font-weight:bold;font-size:1rem;line-height:1.5rem;text-align:left;}.css-1t412wb{box-sizing:border-box;margin:8px 15px 0px 15px;cursor:pointer;}.css-hhzar2{-webkit-transition:-webkit-transform ease 0.5s;-webkit-transition:transform ease 0.5s;transition:transform ease 0.5s;}.css-t54hv4{-webkit-transform:rotate(180deg);-ms-transform:rotate(180deg);transform:rotate(180deg);}.css-1r2j9qz{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-e1ipqs{font-size:1rem;line-height:1.5rem;padding:0px 30px 0px 0px;}.css-e1ipqs a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;}.css-e1ipqs a:hover{-webkit-text-decoration:none;text-decoration:none;}.css-1o76pdf{visibility:show;height:100%;padding-bottom:20px;}.css-1sw9s96{visibility:hidden;height:0px;}#masthead-bar-one{display:none;}#masthead-bar-one{display:none;}.css-1cz6wm{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;font-family:’nyt-franklin’,arial,helvetica,sans-serif;text-align:left;}@media (min-width:740px){.css-1cz6wm{padding:20px;width:100%;}}.css-1cz6wm:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1cz6wm{border:none;padding:20px 0 0;border-top:1px solid #121212;}Frequently Asked Questions About the New Stimulus PackageThe stimulus payments would be $1,400 for most recipients. Those who are eligible would also receive an identical payment for each of their children. To qualify for the full $1,400, a single person would need an adjusted gross income of $75,000 or below. For heads of household, adjusted gross income would need to be $112,500 or below, and for married couples filing jointly that number would need to be $150,000 or below. To be eligible for a payment, a person must have a Social Security number. Read more. Buying insurance through the government program known as COBRA would temporarily become a lot cheaper. COBRA, for the Consolidated Omnibus Budget Reconciliation Act, generally lets someone who loses a job buy coverage via the former employer. But it’s expensive: Under normal circumstances, a person may have to pay at least 102 percent of the cost of the premium. Under the relief bill, the government would pay the entire COBRA premium from April 1 through Sept. 30. A person who qualified for new, employer-based health insurance someplace else before Sept. 30 would lose eligibility for the no-cost coverage. And someone who left a job voluntarily would not be eligible, either. Read moreThis credit, which helps working families offset the cost of care for children under 13 and other dependents, would be significantly expanded for a single year. More people would be eligible, and many recipients would get a bigger break. The bill would also make the credit fully refundable, which means you could collect the money as a refund even if your tax bill was zero. “That will be helpful to people at the lower end” of the income scale, said Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting. Read more.There would be a big one for people who already have debt. You wouldn’t have to pay income taxes on forgiven debt if you qualify for loan forgiveness or cancellation — for example, if you’ve been in an income-driven repayment plan for the requisite number of years, if your school defrauded you or if Congress or the president wipes away $10,000 of debt for large numbers of people. This would be the case for debt forgiven between Jan. 1, 2021, and the end of 2025. Read more.The bill would provide billions of dollars in rental and utility assistance to people who are struggling and in danger of being evicted from their homes. About $27 billion would go toward emergency rental assistance. The vast majority of it would replenish the so-called Coronavirus Relief Fund, created by the CARES Act and distributed through state, local and tribal governments, according to the National Low Income Housing Coalition. That’s on top of the $25 billion in assistance provided by the relief package passed in December. To receive financial assistance — which could be used for rent, utilities and other housing expenses — households would have to meet several conditions. Household income could not exceed 80 percent of the area median income, at least one household member must be at risk of homelessness or housing instability, and individuals would have to qualify for unemployment benefits or have experienced financial hardship (directly or indirectly) because of the pandemic. Assistance could be provided for up to 18 months, according to the National Low Income Housing Coalition. Lower-income families that have been unemployed for three months or more would be given priority for assistance. Read more.The $1.9 trillion measure that the Biden administration ushered through Congress added to a $900 billion relief package enacted in December and a $2 trillion package last March.Mr. Blanchard, in a March 5 post on Twitter, compared the fresh government spending to a snake swallowing an elephant: “The snake was too ambitious. The elephant will pass, but maybe with some damage.”He more recently said that he had “no clue as to what happens to inflation and rates” but that there is a lot of uncertainty and that things “could go wrong.”Mr. Summers, who led the Treasury Department from 1999 to 2001, wrote in a Feb. 4 Washington Post column that, while it was hugely uncertain, “there is a chance that macroeconomic stimulus on a scale closer to World War II levels than normal recession levels will set off inflationary pressures of a kind we have not seen in a generation.”He said in a Bloomberg Television interview last week that “we are running enormous risks.”But Fed officials don’t think big government outlays will be enough to rewrite the world’s low-inflation story. And if it does stoke a slightly faster pickup, that might be a welcome development.Mr. Clarida acknowledged that price gains were likely to speed up over the next few months, but said he expected most of that “to be transitory” and for inflation to return to “or perhaps run somewhat above” 2 percent in 2022 and 2023.“This outcome would be entirely consistent with the new framework we adopted in August 2020,” he said. More