It seems that “patience” is the recurring theme in Federal Reserve lexicon as of late with Fed Vice Chairman Richard Clarida echoing the same on Thursday. After four definitive rate hikes in 2018, the Fed is now taking a wait-and-see approach for 2019.
“We begin the year as close to our assigned objectives as we have in a very long time. In these circumstances, I believe patience is a virtue and is one we can today afford,” said Clarida in prepared remarks for the Money Marketeers of New York University.
With Wall Street crying foul the past few months on the latest market declines, especially after a difficult December, the Fed is changing their tune in unison. Furthermore, with fears of a global economic slowdown despite a robust labor market domestically, the Fed is keen on exercising patience.
“If these crosswinds are sustained, appropriate forward-looking monetary policy should respond to keep the economy as close as possible to our dual-mandate objectives of maximum employment and price stability,” Clarida said.
Related: Federal Reserve Ends 2018 with Fourth Rate Hike
Fed Chair Also Preaches Patience
Clarida’s comments mirror that of Fed Chair Jerome Powell who recently preached patience and adaptability with respect to interest rate policy.
“As always, there is no preset path for policy,” Powell said. “And particularly with muted inflation readings that we’ve seen coming in, we will be patient as we watch to see how the economy evolves.”
Powell’s latest comments came after U.S. equities finished their worst year in over a decade. The Dow fell 5.6 percent, while the S&P 500 lost 6.2 percent and the Nasdaq Composite fell 4 percent.
Furthermore, December alone resulted in the Dow falling 8.7 percent and the S&P 500 losing 9 percent, making it the worst December since 1931. However, it appears the Fed is finally paying closer attention to the pulse of the markets.
Powell referenced 2016 as a prime example of a year that warranted the Fed to be more adaptable with policy.
“No one knows whether this year will be like 2016,” said Powell. “But what I do know is that we will be prepared to adjust policy quickly and flexibly and to use all of our tools to support the economy should that be appropriate to keep the expansion on track, to keep the labor market strong and to keep inflation near 2 percent.”
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