Richard Clarida, global strategic adviser at Pacific Investment Management Co., said the Federal Reserve will alter language in their policy statement at this week’s meeting to reflect a “sluggish” economy.
“The economy softened since the last meeting and inflation is very well behaved,” Clarida said in an interview with Deirdre Bolton on Bloomberg Television’s “InsideTrack.” The Fed will “adjust the language to reflect more sluggish conditions for the economy.”
Fed officials after the last policy meeting on April 28 restated their intention to keep the benchmark interest rate near zero for an “extended period” and saw signs of life in the job market. The Federal Open Market Committee will hold the benchmark interest rate at a record low range of zero to 0.25 percent at its two-day meeting that ends on June 23, according to all of the 96 economists surveyed by Bloomberg News.
The Fed will not adjust policy until at least the spring of 2011, Clarida said in a radio interview today with Tom Keene on “Bloomberg Surveillance.”
European problems “helped the Fed,” said Clarida, who is also a professor of economics at Columbia University. “Because of the flight to quality, interest rates have fallen, which has been supportive of the recovery,” “Broadly, we are in an environment where there is more uncertainty. Right now safety is in government bonds.”
Ten-year note yields fell to 3.06 percent on May 25, the lowest level since April 2009, on concern Europe’s sovereign- debt crisis will slow global economic growth. The Dow Jones Industrial Average fell 7.9 percent last month, its worst May since 1940.
The rally in bonds continued as a government report on June 4 showed employers added fewer jobs in May than economists forecast, stoking speculation that the economic recovery will be weaker than anticipated.
The yield on the 10-year note today declined one basis point, or 0.01 percentage point, to 3.23 percent. Two-year note yields rose one basis point to 0.72 percent.