Richard Clarida, the U.S. Federal Reserve's new Vice Chair, on Thursday backed the central bank's plan to raise interest rates further as the risks that monetary policy must balance are "less skewed to the downside."
In his first major policy speech since being seated at the central bank, Clarida expressed his optimism over the U.S. economy.
"I believe that trend growth in the economy may well be faster and the structural rate of unemployment lower than I would have thought several years ago," Clarida said at the Peterson Institute for International Economics in Washington, D.C.
Clarida noted that the job market could strengthen further without generating inflationary pressures, since prime-age labor force participation remains low in the country.
Speaking of the monetary policy, Clarida said he believed the Fed's monetary policy "remains accommodative."
"The funds rate is just now -- For the first time in a decade -- above the Fed's inflation objective, but the inflation-adjusted real funds rate remains below the range of estimates for the longer-run neutral real rate," Clarida said.
"I believe some further gradual adjustment in the policy rate range will likely be appropriate," he said.
"If strong growth and robust employment gains were to continue into 2019 and be accompanied by a material rise in actual and expected inflation," he said, "that circumstance would indicate to me that additional policy normalization might well be required beyond what I currently expect."
Clarida graduated from Harvard University in 1983 with a Ph.D. in economics. He began a four-year term as Fed's Vice Chair on Sept. 17.
Last week, the Fed released minutes of a policy meeting held in late September, which signaled that the central bank would continue to raise interest rates gradually in order to prevent economic overheating.
On Sept. 26, the Fed raised the target range for the federal funds rate to 2-2.25 percent. It is largely expected to hike once more before year-end.