November 16, 2018 / 2:23 PM / a month ago

UPDATE 1-Fed's Clarida says being at neutral 'makes sense'-CNBC

(Adds comment on global growth risks, Fed’s Kaplan comment)

By Ann Saphir

Nov 16 (Reuters) - Richard Clarida, the newly appointed vice chair of the Federal Reserve, said on Friday that U.S. interest rates are nearing Fed estimates of a neutral rate, and being at neutral “makes sense.”

In a CNBC interview at the U.S. central bank’s Washington headquarters, Clarida said he does not believe the Fed has raised rates too far or too fast, but he also said it is too early to discuss whether the Fed should increase rates so far that they begin to restrict growth.

As rates near the 2.5 percent to 3.5 percent range that Fed officials estimate as a neutral level that neither stimulates nor brakes a healthy economy, he said, policymakers need to pay close attention to signals from the labor market and inflation.

“We are at a point now where we really need to be especially data dependent,” Clarida said. “I think certainly where the economy is today, and the Fed’s projection of where it’s going, that being at neutral would make sense.”

The Fed raised interest rates three times this year and is expected to raise its target again next month, to a range of 2.25 percent to 2.5 percent. As of September, Fed policymakers expected to need to increase rates three more times next year, though betting in financial markets suggests that even two rate hikes might be a stretch.

Clarida said the Fed will need to pay attention to growth beyond its borders, even as the economy domestically is growing faster than it has in a decade or so.

“There is some evidence of global slowing,” Clarida said. “That’s something that is going to be relevant as I think about the outlook for the U.S. economy.”

Federal Reserve Bank of Dallas President Robert Kaplan in a separate interview with Fox Business also said he is seeing a growth slowdown in Europe and China that could affect the U.S. economy. (Reporting by Ann Saphir Editing by Chizu Nomiyama and Susan Thomas)

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