Fed’s Clarida: Inflation ‘Overshoot’ Is ‘More than Moderate’

Federal Reserve Vice Chairman Richard Clarida today acknowledged that the growth of inflation in personal consumption expenditures is “much more than a ‘moderate’ overshoot” beyond the Fed’s 2% target. “I would not consider a repeat performance next year a policy success,” Clarida added, noting that risks to in the inflation outlook remain to the upside.

However, Clarida emphasized that he still thinks that “under appropriate monetary policy, most of the inflation overshoot relative to the longer-run goal of 2% will, in the end, prove to be transitory.” He projected core PCE inflation to surge to at least 3.7% this year before reverting to 2.3% in 2022 and 2.2% in 2023 and 2.1% in 2024.