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Fed to keep open mind in review of strategy, tools, Clarida says
[NEW YORK] The Federal Reserve will keep an open mind as it begins a broad review this year of its monetary policy framework that could result in changes to how it goes about ensuring that prices remain stable and employment plentiful, Fed vice chair Richard Clarida said on Friday.
The Fed will make the results of its review public in the first half of 2020, he said.
"The economy is constantly evolving, bringing with it new policy challenges," Mr Clarida said in remarks prepared for delivery to the US Monetary Policy Forum, sponsored by the University of Chicago Booth School of Business "So it makes sense for us to remain open minded as we assess current practices and consider ideas that could potentially enhance our ability to deliver on the goals the Congress has assigned us."
In a series of community meetings and academic conferences this year, Mr Clarida said, the Fed will review its current flexible inflation-targeting approach, possibly tweaking it to take into better account what has been a very long period of low inflation.
It will also review what new tools it might use to combat any future downturns, including tools that it rejected during the most recent crisis like capping Treasury yields as part of a bid to lower borrowing costs.
This part of the review will also include a reassessment of how effective the Fed's bond-buying programs were in fending off low inflation and encouraging hiring during and after the Great Recession.
The Fed's review will also include a new look at the central bank's communications around policy, he said.
"Any refinements or more material changes to our framework that we might make will be aimed solely at enhancing our ability to achieve and sustain our dual-mandate objectives in the world we live in today," Mr Clarida said.