–Housing ‘Strong,’ Trade Uncertainty Less
WASHINGTON (MaceNews) – The following are excerpts from the Mace News rough transcript of the CNBC interview Thursday with Federal Reserve Vice Chair Richard Clarida, archived in its entirety on cnbc.com:
“Claims are an important indicator of the state of the labor market and it reaffirms what what I just said. The labor market is very strong and robust and that’s a huge positive for the economy and of course as you know and your viewers know … we have a dual mandate of maximum employment and price stability.”
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“I think there’s no doubt there’s been a decline in trade policy uncertainty. We have USMCA. We have phase one on U.S. China and obviously Brexit has occurred and we’ve seen that. And so there’s less trade policy uncertainty and to the extent that was a factor holding back investment that should be a positive this year. … Obviously financial conditions are certainly accommodative.”
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“I think coming into the year certainly I was open to the view that we could see a rebound in business investment. And of course, the housing sector has been strong and will continue to support growth.”
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Q – Virus? Clarida: “Obviously we have a very capable staff here who is doing that and I’m getting either verbal or/or email briefings on that and obviously, well certainly, I’m getting daily emails on it.
“What I would say about that is obviously, let’s begin with, it’s a human tragedy for all those afflicted with corona virus in China. It’s obviously something that is probably going to have a noticeable impact on Chinese growth at least in the first quarter of this year and we won’t know that really till April when we get their GDP statistics. … And we have said is vis-a-vis the U.S. what we would be looking for is some body of evidence that suggests that we need to make a material reassessment of our outlook and certainly we have not done that yet, but we are monitoring because China is a huge part of the global economy.”
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“First of all, there are exports to China and obviously part of the commitments in the phase one deal was for U.S. exports to China to ramp up. So obviously, we’ll be looking at that. Supply chains are very important.”
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“Obviously you have the effect overall and global economic activity. So we’re really looking at multiple indicators right now. But I think the fair point is, sitting here in February, it is too soon to tell but we’re monitoring closely.”
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Q – July rate cut? Clarida: “You know market pricing on rate cuts is a little tricky because there’s the market expectation for rates. There can also be.terminal liquidity premium. So what I prefer to do is to also look at surveys that many folks do of market participants about what they think we’re going to do. So I just checked my screen this morning and on Bloomberg – and they survey about 70 Wall Street economists asking them where they think the federal funds going to be in a year – … and 50 do not think there’s going to be a rate cut.”
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“What we do here at the Fed is we really look at four aspects. We do look at valuation. We also look at leverage. We look at capital in the financial system and liquidity and if you look at all four of those metrics together, I would judge that right now financial stability risk to the U.S. is moderate. Obviously, we can point to different measures of equity valuation.