FORMER FED VICE CHAIR RICHARD CLARIDA SAYS THE FED WILL TIGHTEN UNTIL LONG-TERM INFLATION REACHES 2%

January 20, 2023

The best advice investors could have received at the start of 2022 was to not fight the Federal Reserve as it embarked on its most aggressive tightening cycle in more than 40 years. By raising the federal funds rate and continuing to hike, investors who recognized the impact on bond and stock prices could have avoided a lot of pain.

As we move into 2023, the best advice for investors remains the same – “Don’t fight the Fed.” The Federal Reserve is being clear about its intentions to continue raising short-term interest rates and tapering its bond purchases until it reaches its target of bringing inflation down to 2%.

Richard Clarida, a highly respected expert in Fed policy and Vice Chairman of the Federal Reserve under Chairman Jerome Powell, will be discussing these topics and more in this episode. He is currently a Global Economic Advisor at PIMCO, where he previously coined the phrase “New Neutral” in 2014, predicting that short-term interest rates would remain low for longer. He is also a key architect of the Fed’s new policy framework of targeting an average inflation rate, allowing for higher rates of inflation without prematurely raising rates.

WEALTHTRACK Episode #1930 broadcast on January 20, 2023
Listen to the audio-only version here:

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Richard Clarida mentioned PIMCO’s recently published Cyclical Outlook, in which a case is made that bonds are back.

PIMCO CYCLICAL OUTLOOK “Strained Markets, Strong Bonds.” January 11, 2023

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RICHARD CLARIDA

ACTION POINT

Read: Keeping At It: The Quest for Sound Money and Good Government  

by Paul Volcker

  • Provides invaluable personal insights into Fed’s evolution before, during & after Volcker’s long tenure
  • Reveals inner workings & decision-making processes in a very complex & dynamic world

BOOKSHELF

Keeping At It: The Quest for Sound Money and Good Government

ONE INVESTMENT

BUY TREASURY INFLATION-PROTECTED SECURITIES (TIPS) 

  • Starting yields are highest in years
  • Inflation-indexed securities are an important portfolio element

FROM THE ARCHIVE

This is Richard Clarida’s first appearance on WEALTHTRACK

WEB EXTRA

INSIDE THE FED PERSPECTIVE

Long-time Fed watcher Richard Clarida gained a different perspective, including some surprises once he was inside the Fed making policy decisions.  


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