Federal Reserve Vice Chairman Richard Clarida reacts as he holds his phone during the three-day “Challenges for Monetary Policy” conference in Jackson Hole, Wyoming, United States on August 23, 2019. REUTERS / Jonathan Crosby / File Photo

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Nov. 19 (Reuters) – Central banks in different countries can usefully share their analyzes and adopt similar policies in response to common global shocks, but explicit coordination would likely do more harm than good, the vice president of the Federal Reserve, Richard Clarida.

“Adopting formal cooperation on global monetary policy could plausibly erode central bank credibility and public support for central bank independence,” he said in remarks prepared for the 2021 Asia Economic Policy Conference.

Clarida did not use her speech to directly address the key question of the day – whether the Fed is to respond to high inflation by raising interest rates faster than it has suggested, and as the governor of the Fed Christopher Waller urged him to do so at a separate event on Friday.

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But his perspective can provide insight into his and the Fed’s thinking on how the US central bank might position its policy given that other central banks, including the Bank of England, are signaling that they will soon increase their rates.

To each central bank its own, was Clarida’s message – although sometimes they act in ways that seem to be coordinated just because they are under similar pressures.

Each central bank has a slightly different mandate, so even defining common goals would be difficult, he said.

And even if common goals could be agreed upon, he noted, “central banks would find it difficult to maintain their credibility and independence as well as to communicate a policy that would aggressively raise domestic interest rates not because that domestic inflation is too high, but because foreign inflation is! “

Clarida also noted that central banks are not immune to the policies of others – and that not only changes in U.S. policy affect foreign economies, but also changes in monetary policy in other countries may affect the US economy and even force a response from the Fed.

As an example, he pointed to the devaluation of the Chinese currency in 2015 and the delay it caused to the Fed’s plans to raise rates at the time.

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Reporting by Ann Saphir Editing by Chizu Nomiyama

Our Standards: Thomson Reuters Trust Principles.