Count Federal Reserve Board Vice Chairman Richard Clarida as one more member of the central bank’s governing body to back the independence of the agency in the face of criticism from the president of the United States.
Clarida, discussing recent remarks by President Donald Trump expressing displeasure over the decisions the Fed has made recently on interest rate targets, vowed to adhere to the Fed’s dual mandates of price stability and full employment.
“Our job is to sustain what is a very healthy and robust economy right now,” Clarida said. “And that’s what I’m going to do.”
(In this 45-second segment, FRB Vice Chairman Richard Clarida (left) discusses the Fed’s independence with Adam Posen of PIIE.)
Clarida made the remarks during a question-and-answer session following a speech he delivered about the overall economy to the Peterson Institute for International Economics (PIIE) in Washington.
“Let me tell you the way I think about it,” Clarida said of the Fed’s independence. “History indicates that central bank independence is important in order to achieve objectives given to central banks,” he said, referring to the Fed’s dual mandate bestowed on it by Congress.
“The Fed has a degree of independence in running the policies that over time can serve to best achieve those objectives. I think that’s very important, and I think the Fed is and will continue to be very transparent and accountable about why we are implementing the policies we are to achieve those goals. And I have every intention of continuing to do that, as I’m sure all of my colleagues will as well.”
But that wasn’t enough for questioner Adam Posen, president of PIIE. Posen pointed to political pressures other central banks (using the European Central Bank as an example) had faced in the past. Those banks had been reluctant to pause in raising or lowering rates when circumstances warranted because they did not want to appear they were “caving in” to political pressure, he said.
“Can you reassure us,” Posen asked, referring to the Fed’s and Clarida’s position.
“It will be in no way a consideration as far as I’m concerned,” Clarida responded, referring to political pressure. “We have a very clear mandate which shows up every month in terms of inflation and unemployment. Our job is to sustain what is a very healthy and robust economy right now. And that’s what I’m going to do.”