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I don’t know about you, but when I undertake a previous-planned rebalancing of my portfolio, such as it is, I don’t usually sell seven figures’ worth of a mutual fund before buying it back three days later. But, then again, I was not Donald Trump’s choice to serve as the number two at the Federal Reserve and therefore didn’t get to have any phone calls with Jay Powell in between those two transactions.

Mr. Clarida previously came under fire for buying shares on Feb. 27 in an investment fund that holds stocks — one day before the Fed chair, Jerome H. Powell, announced that the central bank stood ready to help the economy as the pandemic set in…. Mr. Clarida’s recently amended financial disclosure showed that the vice chair sold that same stock fund on Feb. 24, at a moment when financial markets were plunging amid fears of the virus.

Fancy that! What a tremendously unusual and frankly inefficient way to rebalance a portfolio. Because surely a man who so loudly proclaimed himself an honorable public servant with integrity after filing that “inadvertent error”-filled disclosure hadn’t merely changed his mind due to, well, certain circumstances.

The Fed did not provide further explanation of Mr. Clarida’s trade when asked why he had sold and bought in quick succession. Asked if the Fed stood by previous indications that the move was a rebalancing, a spokesperson did not comment…. Mr. Clarida was in close touch with his colleagues throughout that week. He had a call with a board member and a regional Fed president on Feb. 26, his calendars show. That is the way the Fed typically lists meetings of the Fed chair, vice chair and New York Fed president — the Fed’s so-called troika, which sets the agenda for central bank policy — on its largely anonymized official calendars.

What a funny coincidence. Luckily for Clarida, members of the Federal Reserve Board of Governors are, apparently, above the law, and he’ll only have one more opportunity for an embarrassing and totally innocent windfall based on inside central bank information.

Mr. Clarida’s term ends at the close of this month, which it was scheduled to do before news of the scandal broke…. The updated disclosures do show that Mr. Clarida was “in compliance with applicable laws and regulations governing conflicts of interest,” based on the Fed ethics officer’s assessment.

The minutes showed the FOMC is coalescing around the view the economy is ready for a broad-based removal of monetary accommodation, and the omicron variant is unlikely to slow it down. We think the risk of rate liftoff at the March meeting has increased substantially, and will be watching closely Fedspeak ahead of the January meeting for further indications.

A Fed Official’s 2020 Trade Drew Outcry. It Went Further Than First Disclosed. [NYT]
Fed Minutes Flag Chance of Earlier Hikes, Balance-Sheet Rundown [Bloomberg]

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