Federal Reserve Vice President Richard Clarida has issued a statement answering questions from market players lately. The market was previously divided over the next steps to be taken by the Fed. Some in the Fed itself has issued their own views on rising interest rates in the short term.
However, Richard Clarida has made a clearer statement that policymakers will not consider raising interest rates until inflation begins to reach 2%. This explanation aims to help improve public understanding of the central bank's new approach to monetary policy.
According to Clarida, interest rates will be maintained at current levels until PCE inflation reaches 2% as reported by Bloomberg. Clarida concluded that apart from the inflation rate at a reading of 2%, indicators in the labor market will also be taken into account as factors to consider.
Earlier the Fed announced their decision to keep interest rates low for the next three years. The decision was taken with the aim of increasing the inflation rate by more than 2% with the interest rate remaining at 0%.
