Fed's Clarida could see announcing bond taper later this year

Yahoo Finance’s Brian Cheung joins the Yahoo Finance Live panel with the latest as Fed Vice Chairman Richard Clarida says there are "upside" risks to his outlook on inflation.

Video Transcript

- This is Dow off. More than 200 points right now. Some interesting updates to thinking at the Fed. At least when it comes to one of the more important voices out there in a new speech by Fed Vise Chair Richard Clarida presenting some new thoughts around inflation risks. And perhaps a pull forward in his timeline for the first time. Around the rate hikes of cycling finances Fed reporter Brian Cheung is all over that for us today.

Brian, I mean, it's interesting because you think about some of the inflation. The transitory talk at the Fed. What do you make of this?

BRIAN CHEUNG: Walzak, this commentary coming about an hour ago. And as you mentioned, it was the Fed Vise Chairman Richard Clarida who provided a little bit more detail on how the Fed might be timing its tightening of its extraordinary accommodation through the crisis.

So Clarida it is saying that he could see the Fed tapering its asset purchases before the end of this year if he forecast that he has end up playing out as he expects. But he also says if the unemployment rate reaches 3.8% by the end of 2022, that could give a green light for a rate hike by the end, but rather by the beginning of 2023.

There's a few caveats to this. First of all, he said I want to read you this quote. The recovery and expansion following the pandemic are unlike any we have ever seen. And it will serve us well to remain humble in predicting the future.

But there's also the caveat beyond the data itself that Clarida himself will be gone from the Fed board by the end of 2022 barring any sort of renomination from the Biden Administration, which I haven't heard of. So that really kind of underscores how the Fed really the other cast of characters could come into play.

And when you do look at those projections from the Fed's last June meeting rather that was two meetings ago, you can see that the median member of the 17 member FOMC does see the base case for perhaps two interest rate hikes by the end of 2023. This all coming as we hear commentary from former Fed Chair Janet Yellen who's now currently the Treasury Secretary talking about the idea of trying to push that infrastructure bill that's currently working its way through Capitol Hill across the finish line.

She's really saying that things like child care, training programs. The availability of high speed broadband internet are all priorities and that for that reason. Congress should get moving on those investments. She said, quote now is fiscally the most strategic time to make them and one big reason guys because of low interest rates.

- All right. Brian Cheung bringing us the latest there as we continue to watch for any updated guidance there on the interest rate hike front or tapering. Appreciate that.