“It is true that low rates support stock valuations,” the vice president of the Federal Reserve, Richard Clarida, but added that low rates also support unemployment and other key economic factors, according to Reuters.
Additional conclusions
“In the past, the Fed has relied too heavily on a labor market measure in its focus on the unemployment rate.”
“What we found before the pandemic is that the US economy can operate at a much lower level of unemployment without fueling inflation.”
“It is likely to be at the effective lower limit for a few more years.”
“We are doing a lower version for a longer time.”
“We are not going to raise rates preventively because one model suggests that the unemployment rate is too low.”
“In terms of our reaction function, the new framework is simpler than under the previous policy regime.”
“The level of bank reserves has increased, reflects the expansion of the balance sheet.”
“The reserves are well above enough at these levels.”
Market reaction
These comments do not appear to have an impact on market sentiment. At time of writing, the S&P 500 Index was up 0.17% on the day at 3,810.
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