for release on delivery 10 : 10 a. m. edt march 25, 2021 u. s. economic outlook and monetary policy remarks by richard h. clarida vice chair board of governors of the federal reserve system at the 2021 institute of international finance washington policy summit washington, d. c. ( via webcast ) march 25, 2021 it is my pleasure to meet virtually with you today at the 2021 institute of international finance ( iif ) washington policy summit. 1 i regret that we are not doing this session in person, but i do hope next time we will be gathering together in washington. i look forward, as always, to a conversation with my good friend and onetime colleague tim adams, but first, please allow me to offer a few remarks on the economic outlook, federal reserve monetary policy, and our new monetary policy framework. current economic situation and outlook in the second quarter of last year, the covid - 19 pandemic and the mitigation efforts put in place to contain it delivered the most severe blow to the u. s. economy since the great depression. gross domestic product ( gdp ) collapsed at a roughly 31. 5 percent annual rate in the second quarter of 2020, more than 22 million jobs were lost in march and april, and the unemployment rate rose from a 50 - year low of 3. 5 percent in february to almost 15 percent in april. since then, economic activity has rebounded, and it is clear that the economy has proven to be much more resilient than many forecast or feared one year ago. gdp grew by almost 8 percent at an annual rate in the second half of last year, and private forecasters project that gdp will grow roughly 6 percent — and possibly 7 percent — this year. as shown in the latest summary of economic projections ( sep ), the median of federal open market committee ( fomc ) participants ’ projections for 2021 gdp growth is 6. 5 percent. 2 if these projections are realized, gdp will grow at the the views expressed are my own and not necessarily those of other federal reserve board members or federal open market committee participants. i would like to thank chiara scotti for her assistance in preparing these remarks. the most recent sep is available on the board ’ s website at https : / / www. federalreserve. gov / monetarypolicy / fomccalendars. htm. - 2fastest four - quarter pace since 1984. and, as this is

that the committee approved last august. in our new framework, we acknowledge that policy decisions going forward will be based on the fomc ’ s estimates of “ shortfalls [ emphasis added ] of employment from its maximum level ” — not “ deviations. ” 5 this language means that going forward, a low unemployment rate, in and of itself, will not be sufficient to trigger a tightening of monetary policy absent any evidence from other indicators that inflation is at risk of moving above mandate - consistent levels. with regard to our price - stability mandate, while the new statement maintains our definition that the longer - run goal for inflation is 2 percent, it elevates the importance — and the the most recent version of the 2012 statement is available on the board ’ s website at https : / / www. federalreserve. gov / monetarypolicy / files / fomc _ longerrungoals _ 201901. pdf. - 5challenge — of keeping inflation expectations well anchored at 2 percent in a world in which an effective - lower - bound constraint is, in downturns, binding on the federal funds rate. to this end, the new statement conveys the committee ’ s judgment that, in order to anchor expectations at the 2 percent level consistent with price stability, it will conduct policy to achieve inflation outcomes that keep long - run inflation expectations anchored at our 2 percent longer - run goal. as chair powell indicated in his jackson hole remarks, we think of our new framework as an evolution from “ flexible inflation targeting ” to “ flexible average inflation targeting. ” 6 while this new framework represents a robust evolution in our monetary policy strategy, this strategy is in service to the dual - mandate goals of monetary policy assigned to the federal reserve by the congress — maximum employment and price stability — that remain unchanged. 7 concluding remarks while our interest rate and balance sheet tools are providing powerful support to the economy and will continue to do so as the recovery progresses, it will take some time for economic activity and employment to return to levels that prevailed at the business cycle peak reached last february. we are committed to using our full range of tools to support the economy until the job is well and truly done to help ensure that the economic recovery will be as robust and rapid as possible. see jerome h. powell ( 2020 ), “ new economic challenges and the fed ’ s monetary policy review, ” speech delivered at “ navigating the decade ahead : implications for monetary policy, ” a symposium