By Howard Schneider

WASHINGTON, (Reuters) – A Fed policymaker said Monday that the Fed can meet its benchmarks to raise interest rates next year. This would allow for jobs to be restored back where they were prior the pandemic. Inflation is already at dangerous levels.

Richard Clarida Fed vice-chair stated that the Fed was still “a way off” raising interest rates. However, his current economic outlook is good enough to show that the Fed will meet the “necessary conditions” for increasing the federal funds rate by 2022.

Clarida stated that an interest rate track similar to those laid out in September by Fed officials would be “entirely consistent” with Fed’s new framework. This includes hitting the Fed’s 2% inflation target, and reaching maximum employment. Clarida made these remarks in preparation for the presentation at Brookings Institution.

The Fed rate “dotplot” indicated that Fed officials were moving toward a rate increase next year, but equally divided over the timing of this move. A majority showed rates increasing more steadily between 2023 and 2024.

Clarida’s remarks are made as the Fed shifts attention to a potential clash between its hopes for driving job growth as high as possible and its concerns about inflation being too high.

Clarida explained that inflation has been “much greater than a moderate” overshoot to our 2-percent longer-run inflation target. Clarida added, “I would not consider a repetition performance next year a successful policy.” Clarida stated that while he believes prices will continue to rise above the Fed target for the time being, it should be lower than the Fed preferred price measure.

According to him, the expected increase in job participation as the economy expands will drive the unemployment rate up to 3.8% next year. This would “eliminate” the “employment gap of 4.2 million relative to the time before the pandemic.