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For release on delivery
8:00 a.m. EST
January 9, 2020

U.S. Economic Outlook and Monetary Policy

Remarks by
Richard H. Clarida
Vice Chair
Board of Governors of the Federal Reserve System
at the
C. Peter McColough Series on International Economics
Council on Foreign Relations
New York, New York

January 9, 2020

Thank you for the opportunity to join you bright and early on this January 2020
Thursday morning. As some of you may know, I am a longtime member of the Council
on Foreign Relations and have attended and participated in many such events over the
past 20 years, although I will point out that in my previous visits to the dais, I was in the
somewhat less demanding position of asking the questions rather than answering them. I
am really looking forward to this conversation, but I would like first to share with you
some thoughts about the outlook for the U.S. economy and monetary policy. 1
The U.S. economy begins the year 2020 in a good place. The unemployment rate
is at a 50-year low, inflation is close to our 2 percent objective, gross domestic product
growth is solid, and the Federal Open Market Committee’s (FOMC) baseline outlook is
for a continuation of this performance in 2020. 2 At present, personal consumption
expenditures (PCE) price inflation is running somewhat below our 2 percent objective,
but we project that, under appropriate monetary policy, inflation will rise gradually to our
symmetric 2 percent objective. Although the unemployment rate is at a 50-year low,
wages are rising broadly in line with productivity growth and underlying inflation. We
are not seeing any evidence to date that a strong labor market is putting excessive costpush pressure on price inflation.
Committee projections for the U.S. economy are similar to our projections at this
time one year ago, but over the course of 2019, the FOMC shifted the stance of U.S.
monetary policy to offset some significant global growth headwinds and global


These remarks represent my own views, which do not necessarily represent those of the Federal Reserve
Board or the Federal Open Market Committee. I am grateful to Brian Doyle of the Federal Reserve Board
staff for his assistance in preparing this text.
The most recent Summary of Economic Projections is an addendum to the minutes of the December 2019
FOMC meeting. See Board of Governors of the Federal Reserve System (2020), “Minutes of the Federal
Open Market Committee, December 10–11, 2019,” press release, January 3,

-2disinflationary pressures. In 2019, sluggish growth abroad and global developments
weighed on investment, exports, and manufacturing in the United States, although there
are some indications that headwinds to global growth may be beginning to abate. U.S.
inflation remains muted. Over the 12 months through November, PCE inflation was
running at 1.5 percent, and core PCE inflation, which excludes volatile food and energy
prices and is a better measure of underlying inflation, was running at 1.6 percent.
Moreover, inflation expectations, those measured by both surveys and market prices,
have moved lower and reside at the low end of a range I consider consistent with our
price-stability mandate.
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 U.S. outlook on track. I believe that monetary policy is in a good place and should
continue to support sustained growth, a strong labor market, and inflation running close
to our symmetric 2 percent objective. As long as incoming information about the
economy remains broadly consistent with this outlook, the current stance of monetary
policy likely will remain appropriate.
Looking ahead, monetary policy is not on a preset course. The Committee will
proceed on a meeting-by-meeting basis and will be monitoring the effects of our recent
policy actions along with other information bearing on the outlook as we assess the
appropriate path of the target range for the federal funds rate. Of course, if developments
emerge that, in the future, trigger a material reassessment of our outlook, we will respond

-3In January 2019, my FOMC colleagues and I affirmed that we aim to operate with
an ample level of bank reserves in the U.S. financial system. 3 And in October, we
announced and began to implement a program to address pressures in repurchase
agreement (repo) markets that became evident in September. 4 To that end, we have been
purchasing Treasury bills and conducting both overnight and term repurchase operations,
and these efforts were successful in relieving pressures in the repo markets over the yearend. As we enter 2020, let me emphasize that we stand ready to adjust the details of this
program as appropriate and in line with our goal, which is to keep the federal funds rate
in the target range desired by the FOMC. As the minutes of the December FOMC
meeting suggest, it may be appropriate to gradually transition away from active repo
operations this year as Treasury bill purchases supply a larger base of reserves, though
some repo might be needed at least through April, when tax payments will sharply reduce
reserve levels.
Finally, allow me to offer a few words about the FOMC review of the strategy,
tools, and communication practices that we commenced in February 2019. This
review—with public engagement unprecedented in scope for us—is the first of its kind
for the Federal Reserve. Through 14 Fed Listens events, including an academic
conference in Chicago, we have been hearing a range of perspectives not only from
academic experts, but also from representatives of consumer, labor, community, business,
and other groups. We are drawing on these insights as we assess how best to achieve and


See the Statement Regarding Monetary Policy Implementation and Balance Sheet Normalization, which
is available on the Board’s website at Also see the Balance
Sheet Normalization Principles and Plans, available on the Board’s website at
See the Statement Regarding Monetary Policy Implementation, which can be found on the Board’s
website at

-4maintain maximum employment and price stability. In July, we began discussing topics
associated with the review at regularly scheduled FOMC meetings. We will continue
reporting on our discussions in the minutes of FOMC meetings and will share our
conclusions with the public when we conclude the review later this year. 5
Thank you very much for your time and attention. I look forward to the
conversation and the question-and-answer session to follow.


Information about the review and the events associated with it is available on the Board’s website at