Clarida Fed pushes Trump and Pence to call for rate cuts due to low inflation

Bloomberg News / Landov

The decline in core inflation does not warrant an immediate cut in interest rates, Federal Reserve Vice President Richard Clarida said Tuesday in a statement that runs counter to the president's views. Donald Trump and Vice President Mike Pence.

"We do not see a strong case for moving rates back and forth," Clarida said in an interview with Bloomberg TV.

Trump tweeted before the Fed meeting to support a rate cut of one percentage point. Mr. Pence made a similar appeal stating, "This is exactly the time, not only not to raise interest rates, but we should consider reducing them."

Underlying inflation, as measured by the Fed's preferred core personal consumption expenditure index, reached 1.6% year-on-year in March, following a near 2% fall latest.

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Asked about the strategy to bring inflation back to the 2% target, Clarida responded: "We believe that the policy in place will enable us to achieve this."

He echoed Fed Chairman Jerome Powell's view that the weakness of underlying inflation was partly due to "transitional" factors.

See: The Fed maintains stable interest rates

In other topics, Clarida said the Fed had not modeled the economic impact of the latest Trump administration threat to increase tariffs on products. Chinese.

Until now, trade disputes have not had a significant impact on US growth or inflation, he said.

Shares plummeted on Tuesday as investors worried about the tension between the United States and China over the bilateral trade deficit. The Dow Jones Industrial Average

DJIA, -1.55%

was down almost 400 points.

Clarida, who leads the review of the Fed's monetary policy strategy, said it may not be completed this year. There is no artificial delay, he said.

Clarida said the Fed's current strategy – targeting inflation of 2% – was working well.

At present, the Fed is only aiming for an inflation target of 2% every year and lets the past disappear. Most of the ideas put forward would invite the Fed to take into account what has happened in the past. For example, if inflation exceeds the target set for one year, the Fed should authorize an overrun the following year.

"Some theoretically advanced ideas, such as price-level targeting and other similar strategies, make-up strategies, look good in textbooks and look good in scientific articles … but in practice, they do not work. Have not been tried because we need to seriously consider some implementation issues, said Clarida.

The Fed is also studying different tools to use during a recession, said the vice president of the Fed.