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For release on delivery
3:00 p.m. EST
February 25, 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
36th Annual NABE Economic Policy Conference
Washington, D.C.

February 25, 2020

Thank you for the opportunity to participate again this year in the Annual
Economic Policy Conference of the National Association for Business Economics. I am
really looking forward to this conversation. But first, I would like to share with you some
thoughts about the outlook for the U.S. economy and monetary policy. 1
In its 11th year of a record expansion, the U.S. economy is in a good place. The
labor market remains strong, economic activity is increasing at a moderate pace, 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, or PCE, price
inflation is running somewhat below the Committee’s 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 around 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 cost-push
pressure on price inflation.
Although the fundamentals supporting household consumption remain solid, over
2019, sluggish growth abroad and global developments weighed on investment, exports,
and manufacturing in the United States. Coming into this year, indications suggested that
headwinds to global growth had begun to abate, and uncertainties around trade policy had
diminished. However, risks to the outlook remain. In particular, we are closely
monitoring the emergence of the coronavirus, which is likely to have a noticeable impact


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,

-2on Chinese growth, at least in the first quarter of this year. The disruption there could
spill over to the rest of the global economy. But it is still too soon to even speculate
about either the size or the persistence of these effects, or whether they will lead to a
material change in the outlook. In addition, U.S. inflation remains muted. And inflation
expectations—those measured by surveys, market prices, and econometric models—
reside at the low end of a range I consider consistent with our price-stability mandate.
Over the course of 2019, the FOMC undertook a shift in the stance of monetary
policy to offset some significant global growth headwinds and global disinflationary
pressures. I believe this shift was well timed and has been providing support to the
economy and helping to keep the U.S. outlook on track. Monetary policy is in a good
place and should continue to support sustained growth, a strong labor market, and
inflation returning 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.
That said, 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.
These efforts have been successful in achieving stable money market conditions,
including over the year-end. As our bill purchases continue to build reserves toward
levels that we associate with ample conditions, we intend to gradually transition away
from the active use of repo operations. And as reserves reach durably ample levels, we
intend to slow the pace of purchases such that our balance sheet grows in line with trend
demand for our liabilities. 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, and that these operations are technical
measures not intended to change the stance of monetary policy.
Finally, allow me to offer a few words about the FOMC’s review of the monetary
policy strategy, tools, and communication practices that we commenced in 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 a research 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


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

-4groups. We are drawing on these insights as we assess how best to achieve and maintain
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 complete 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