Monetary policy should not ignore financial markets - Clarida

Friday, 21. February 2020 19:53

Speaking on a panel in New York on Friday, Federal Reserve Vice-Chairman Richard Clarida advised that when deciding on the monetary policy, movements in financial markets should not be tossed aside but put into the equation.

"Persistent shifts in financial market conditions can be informative," the central banker noted, adding that when combined with household surveys and firms surveys and economic estimates, they can serve as "valuable and reasonably robust foundations" in assessing policy rates and inflation expectations.

Describing financial market signals as "noisy," Clarida pointed out that although daily shifts in asset prices are not likely to say anything about the structure of the economy, optimal monetary policy "will (almost) always" be in correlation with the prices of assets, he underlined.

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