Clarida says Fed bond purchases to keep pace through the rest of the year

Federal Reserve Vice Chairman Richard Clarida said he expects the central bank to maintain the pace of its asset purchases through the balance of 2021.

“My economic outlook is consistent with us keeping the current pace of purchases throughout the rest of this year,” he told the Council on Foreign Relations during a presentation Friday.

As things stand, the Fed is buying at least $120 billion a month, split between a minimum $80 billion in Treasurys and $40 billion in mortgage-backed securities. The pace of purchases has accelerated through the Covid-19 pandemic as a continuing effort both to maintain economic growth and market functioning.

Markets have been wondering how long the Fed will keep the program going given that its holdings have now eclipsed $7 trillion.

Clarida said Friday he doesn’t see a pullback anytime this year even though he expects growth to accelerate.

“I think it could be quite some time before we would think about tapering the pace of our purchases the way I look at the data, and I’m relatively optimistic about the economic outlook,” he added in a session moderated by CNBC’s Steve Liesman. “We want further progress in the labor market and moving toward our 2% inflation objective, and I think that’s some ways away before we declare victory on that.”

While the Fed will keep its options open as the economy progresses through the year, Clarida said officials are committed to hitting and likely exceeding their inflation goal, as well as to full, inclusive employment.

Following the December meeting, the Fed committed to keeping the asset purchase program going until substantial progress has been made toward the mandate. Earlier this week, Atlanta Fed President Raphael Bostic said he wouldn’t be surprised if the pace of the bond buying decelerates by the end of the year.

“Right now, I think maintaining the current pace of purchases throughout the remainder of this year is my expectation,” Clarida said.