Former Fed Vice Chair Richard Clarida Talks Bonds and Retirement

Summary

---

Bloomberg Talks – Former Fed Vice Chair Richard Clarida Talks Bonds and Retirement

Aired: July 31, 2026
Host: Karen Moscow & Scarlett (Bloomberg)
Guest: Richard Clarida (Former Vice Chair, Federal Reserve; Global Economic Adviser, Pimco; Professor, Columbia University)

---

Episode Overview

This episode features an in-depth conversation with former Federal Reserve Vice Chair Richard Clarida, covering the recent volatility in the US bond market, evolving inflation measurement, the challenges facing central bank communication, and the reality of an increasingly divergent ("K-shaped") US economy. The latter part of the episode veers into lighter territory, discussing Clarida’s personal finance habits and his musical hobby.

---

Key Discussion Points & Insights

1. Bond Market Turbulence: Yields and Economic Signals

• Context: The 30-year bond yield reached a 19-year high at 5.26% this week—a major sell-off event.
• Clarida’s Insight [01:06]:
  "There are a lot of reasons bond yields can go up and down, not just the Fed. The Fed's an important part of it... break-even inflation... is at or below where it was at least out to 10 years when [Warsh] became chairman. But certainly the reaction during the press conference was... probably not one that was welcome."
• Discussion: The bond market is influenced by factors beyond the Fed, including traders’ inflation expectations and global developments.
• Policy Watching: The Trump administration is seen as paying close attention to the bond market, particularly the 10-year yield, because of its importance for mortgage, auto, and corporate borrowing.
  Clarida [01:49]:
  "So much of the economy—people borrow long for car loans or mortgages or corporate loans. And so that's probably what he had in mind."

---

2. Philosophical Debates in Central Banking

• Lucas Critique & Policy Metrics:
  The conversation references the Lucas critique—a foundational economic theory on policy effectiveness—and the challenge of measuring inflation for central bank goals.
• Clarida [02:49]: "Some version of the Lucas critique should remind us that when we talk about measures of inflation or something else... we might make them such that they're not very good measures or very good objectives."
• Fed Communication Gap:
  Scarlett summarizes the uncertainty post-press conference, noting operational guidance was "poor," and asking how confidence can be restored:
  [Scarlett paraphrasing Anna Wong, 03:08]:
  "The news conference was rich in philosophy, process, and institutional aspirations, but poor in operational guidance. The absence of clarity... appears to have spoken louder than... words."

---

3. Inflation Targeting and the Fed’s Approach

• Which Inflation Metric?
  There’s debate whether the Fed should continue using the Personal Consumption Expenditures (PCE) index, shift to an average, or consider others (like CPI or PPI).
• Clarida [04:02]:
  "The Fed adopted that [PCE] again in January. He left open the possibility that the task forces could recommend other measures... an inflation targeting central bank needs to be clear about what it is it's targeting."
• What to Expect at Jackson Hole?
  The upcoming Jackson Hole symposium could be a platform for the Fed to preview future policies, but expectations remain uncertain.
  Clarida [04:52]:
  "Jackson Hole may serve a couple of purposes. Historically, as we've seen, chairs have used Jackson Hole as sort of a sneak preview... He's also interested in some big picture questions... I think it's too early to tell what he'll do at Jackson Hole."

---

4. The Hall of Mirrors Problem: Central Banks & Markets

• Host’s Layperson Frustration [05:22]:
  Karen Moscow voices confusion about why the Fed would take cues from the bond market, when the bond market is taking cues from the Fed.
• Clarida’s Explanation [05:41]:
  "The Fed is a very important part of 10-year treasury yields. It's not the only thing that drives yields... It's called, sometimes, the hall of mirrors problem in central banking: the central bank looks at the market, the market looks at the central bank—it gets circular."

---

5. Art vs. Science in Central Banking

• Forward Guidance and Economic Models:
  Central banking is presented as a blend of art and science, especially in terms of how forward guidance is used (or withheld).
• Clarida [06:46]:
  "Kevin Warsh came in with an ambitious agenda... in the CGG model, there's not a role for forward guidance because the market understands the Fed's reaction function and the Fed understands the market... It's incumbent for the markets to have a broad understanding of how the central bank will react to data."

---

6. The K-Shaped Economy: Real-World Implications

• Rising Inequality:
  The divergence between asset owners and non-owners is deepening.
  Clarida [08:07]:
  "Yes, broadly we... have had a K-shaped economy for some time. But the K, the branches of the K, have been diverging more widely in the last six or seven years... about 60% of Americans live in a house that's owner-occupied, sometimes with their parents... most of that 60% owns stocks, most of the other 40% doesn't... the top of that K is doing pretty well. If you're in the other part... you're living paycheck to paycheck. It's been a tough six years."

---

7. Personal Finance and Retirement

• Lifestyle Choices & Saving:
  • Clarida admits he leaves most of the saving strategies to his wife.
    [09:06]:
    "Well, I leave the saving to my wife. She's pretty good at it."
  • His personal splurge is music—buying guitars and recording equipment, recording his own albums.
  • Scarlett praises his music:
    [09:43]:
    "I will editorialize as I have heard it. It is not a vanity album. It is exquisite. I was shocked."

---

8. Lighter Segment: Music as a Hobby

• Clarida’s Musical Side:
  • He has an album coming out (‘Take to Take to’) later in 2026.
    [09:35]:
    "It's going to be called 'Take to Take to.'"
  • Plays folk rock, collaborates with professional musicians across the US and UK.
  • New album to be released by December 31, 2026.

---

Notable Quotes & Memorable Moments

• Clarida on the circularity of Fed-market dynamics [05:41]:
  "It's called, sometimes, the hall of mirrors problem in central banking, which is the central bank looks at the market, the market looks at the central bank, it gets circular."
• Clarida on inequality [08:07]:
  "If you're in the other part of the K, you don't own your house, you don't own a lot of stocks, you're living paycheck to paycheck. It's been a tough six years and so there's, there's no doubt we're in a K-shaped [economy]."
• Scarlett on Clarida’s music [09:43]:
  "It is not a vanity album. It is exquisite. I was shocked."

---

Timestamps for Key Moments

• Bond Market Sell Off and Meaning [00:49–01:49]
• Lucas Critique, Inflation Measurement, and Fed Communication [02:26–04:52]
• Fed vs. Market Cues: 'Hall of Mirrors' [05:22–06:21]
• Forward Guidance Debate & Economic Science vs. Art [06:21–07:40]
• K-Shaped Economy & Inequality [07:47–08:53]
• Clarida on Saving and Music [09:06–09:57]

---

Tone & Atmosphere

• The conversation is collegial, sometimes technical, and alternates between high-level economic concepts and relatable, personal anecdotes.
• Scarlett’s and Karen’s questions help bridge the gap for non-economist listeners, while Clarida delivers nuanced, thoughtful responses.

---

For listeners seeking deep economic context, with engaging personal flourishes, this episode offers a clear-eyed look at the forces shaping US financial policy and household prosperity in 2026.

Transcript

[Karen Moscow]

Get the news you need in just 15 minutes.

[Richard Clarida]

Start your day with Bloomberg Daybreak, the podcast with a global view on the stories that matter. I'm Nathan Hager.

[Karen Moscow]

And I'm Karen Moscow. Join us each morning for curated stories on current events, politics, business and foreign

[Richard Clarida]

relations, plus one conversation on the day's biggest developments, all in just 15 minutes.

[Karen Moscow]

Subscribe to Bloomberg Daybreak for a precise, thoughtful take on the stories that matter.

[Richard Clarida]

Listen to Bloomberg Daybreak each morning on Apple, Spotify or anywhere you listen to

[Karen Moscow]

Bloomberg Audio Studios, podcasts, radio news.

[Scarlett]

Claire is with us with Pimco of Columbia University. Always and always the vice chairman, former vice chairman I should say, of the Federal Reserve System. And I think you know, we're going to straddle here between Bloomberg Money and everything else.

[Karen Moscow]

Yeah. And we got to start with what we saw in the bond market this week because we had a sell off in the 30 year yield this week reached a 19 year high, 5.26%. Rich Clarida, does the sell off in the long bond tell us anything about the US Economy and therefore how people's prospects might change?

[Richard Clarida]

Well, there are a lot of reasons bond yields can go up and down, not just the Fed. The Fed's an important part of it. What I would point to is that so far Kevin Warsh has been chair really only six, seven weeks but an important measure in the bond market which is break even inflation. So sort of traders expectation of inflation is at or below where it was at least out to 10 years when he became chairman. But certainly the reaction during the press conference was prob probably not one that was welcome.

[Karen Moscow]

Right. We know the first Trump administration cared a lot about the stock market and the second one seems to have added the bond market to its list of things that it's watching. Which part of the bond market does this administration care Most about? The 30 year yield, the 10 year yield?

[Richard Clarida]

Oh my goodness. I'm not sure. I would defer probably to Secretary Besson. I do think at one point he may have said that he's focused more on the 10 year yield than he is on the fed funds rate. Well so much of the economy people borrow long for car loans or mortgages or corporate loans. And so the that's probably what he had in mind.

[Scarlett]

So what we're going to do here, it's Bloomberg Money. We do personal finance, we do wealth management, we do retirement. But we also have Richard Claire to where this is in the heart of this debate over the chairman of the Fed. So it's going to be a Little bit. Sort of like Scarfu and Tom doing Bloomberg surveillance. Like more protect the children.

[Karen Moscow]

The lines are blurry.

[Richard Clarida]

Protect the children at home surveillance.

[Scarlett]

Okay, so. So former vice chairman, with great respect, I don't want to turn this into a history lesson, but you have Warship Nominally of Stanford talking about the Lucas critique and then going over what people don't know is you're directly involved with this. Let's first listen to Chairman Warsh on Wednesday.

[Richard Clarida]

Some version of the Lucas critique should remind us that when we talk about measures of inflation or something else and we describe those measures as being consistent with our objectives, we might make them such that they're not very good measures

[Scarlett]

or very good objectives. The chairman before he had the Questions from Michael McKee of Bloomberg. The world lit up. Anna Wong with legit crud out of Lucas. Chicago was fiery. The news conference was rich in philosophy, process and institutional aspirations, but poor in operational guidance. The absence of clarity like analytical specificity appears to have spoken louder than Worcester's words. So Lucas did what he did. CGG Claire to Golly and Gertner reinvented modern economics with something called dynamic stochastic goal general equilibrium theory. We come out now and as Claudia Sahm says, we have a chairman who's not sure what he's looking at in inflation. How does he get the rails back on? Does he need to reaffirm PC is the inflation series?

[Richard Clarida]

Well, I think what he said at the press conference is, is for now until next January at least that's going to be correct. The Fed adopted that again in January. He left open the possibility that the task forces could recommend other measures. They could go to an average instead of picking one index. They could look at cpi, ppi. There are a lot of things they could do. But I think as usual raises an important point is that an inflation targeting central bank needs to be clear about what it is it's targeting. It can, it may evol. And so I think that will be important.

[Scarlett]

Very, very importantly then here if we need to get the system back with a confidence about the Fed. How does he do that at Jackson Hole? Does he have to reaffirm, as Saab says, that inflation is the appropriate measurement and not a policy?

[Richard Clarida]

Well, I think Jackson Hole may serve a couple of purposes. Historically, as we've seen, chairs have used Jackson Hole as sort of a sneak preview of coming attractions at the Sept, November and December meetings. Chairman Warshinned he may do that. He's also interested in what he called some big question, big picture questions that he sort of previewed at this meeting and he's also talking to the task forces. I think it's too early to tell what he'll do at Jackson Hole, but he may, he may do that as well.

[Karen Moscow]

I find it really interesting that he doesn't want to tell the bond market a whole lot of things and he's kind of waiting to take his cue from the bond market. From a layperson point of view, it feels very circular. Right. The central bank sets a benchmark interest rate. The bond market takes its cue from that. What's the rationale for the Fed to take its cue from the bond market? That's relying on the Fed to set policy. Help me understand that.

[Richard Clarida]

So, so here's the way I would express it. The Fed is a very important part of 10 year treasury yields. It's not the only thing that drives yields. So I think the chairman was important to emphasize that the Fed does want to step back and interpret movements in bond yields. It could be inflation, it could be global growth, Middle east hostilities. But certainly the chairman and the Fed understands that an important part of 10 year yields is the expected path of the funds rate. And to Scarlet's point, and I actually, Ben Bernanke gave a speech on this, as did I as vice chair. It's called, sometimes called the hall of mirrors problem in central banking, which is the central bank looks at the market, the market looks at the central bank, it gets circular.

[Scarlett]

Let's go back to your paper galley. And Gertler didn't know this, Richard Claire to channeling Alan Blinder. Having looked at monetary policy from Joni Mitchell's Both Sides now I can testify that central banking in practice is as much an art as a science. How does Warsh get back to science? Declared a silence versus some mom and pop philosophy he learned at Stanford.

[Richard Clarida]

Oh, well, I, I think Kevin Warsh and the committee understand that. Look, I. Kevin came in, Chairman Warsh came in with an ambitious agenda. And I think that they're going to both focus on implementing that agenda as well as getting to where they need to be on policy. I guess where I would try to relate, Clara, to Galli Gertler to the current conversation is perhaps specifically in the domain of forward guidance. And so in the CGG model, there's actually not a role for forward guidance because the market understands the Fed's reaction function and the Fed understands the market. If you're not going to do forward guidance, then it's incumbent for the markets to have a broad understanding of how the central bank will react to data. If we had six bad months in a row of inflation data. Would they hike them by how much? They're not committing to that. But they're saying if the data comes out this way for everybody, Bloomberg money

[Scarlett]

and I got goosebumps. This is like the real deal. I mean this is what the adults in the room are arguing about right now.

[Karen Moscow]

Well, for people who are watching this and don't quite know all the names that you and Rich are throwing out there, I want to bring it back to the real economy and real people's concerns. Do you agree with those people who say that we have a K shaped economy where the higher income and asset owners are doing well and everyone else is kind of struggling that downward arm and if so, how do we solve for that?

[Richard Clarida]

Well, yes, broadly we, we do and have had a K shaped economy for some time. But the K, the branches of the K have been diverging more widely in the last six or seven years. The way I like to think about it Scarlett, is roughly 60% of Americans live in a, in a house that's owner occupied housing, sometimes with their parents, but it's owned about 40% rent. Most of that 60% owns stocks. Most of the other 40% doesn't. So we've been in an economy for some time, but especially in the last six years when stocks, stocks have gone up, house prices have gone up. So the top of that K is doing pretty well. If you're in the other part of the K, you don't own your house, you don't own a lot of stocks, you're living paycheck to paycheck. It's been a tough six years and so there's, there's no doubt we're in a cachet.

[Karen Moscow]

The services cost just keep getting more expensive as well. Bloomberg Money is about how you invest and make your money, but it's also about how you spend your money. So Rich Claire, I want to ask you on this Friday, what's your splurge? First of all, and, and how do you save? What do you save?

[Richard Clarida]

Well, I leave the saving to my wife. She, she's, she's pretty good at it. My splurge is on my hobby is music. So I buy guitars, I buy recording equipment. Really I spend money on recording my album. So yeah, that's my splurge.

[Karen Moscow]

Didn't you record an album in 2016?

[Richard Clarida]

I did. Available Spotify, Apple Music stream for free on YouTube. The new albums coming out later, later this year. Maybe we'll do a rollout party on this show.

[Karen Moscow]

Oh, it's a follow up.

[Richard Clarida]

Yeah, yeah.

[Karen Moscow]

Oh, what's it called?

[Richard Clarida]

It's going to be called Take to Take to.

[Karen Moscow]

Okay. And what folk music like what's your folk rock?

[Richard Clarida]

Yeah, folk rock. Someone who listened to too many Beatles

[Scarlett]

albums and I will editorialize as I have heard it. It is not a vanity album. It is exquisite. I was shocked.

[Richard Clarida]

Well, thank you.

[Scarlett]

Really, really quite. Thank you quite.

[Karen Moscow]

And you're the solo star. Like I don't hear back band name in there.

[Richard Clarida]

I write the songs and do the vocals but I work with professional studio musicians in London, Louisiana and Nashville. So all the music you hear is really good playing and then I do some singing on it.

[Karen Moscow]

All right. Richard Clarida's new album coming out. What day?

[Richard Clarida]

Well, by December 31st.

[Karen Moscow]

By December 31st. Richard Clarida, thank you so much. Pimco Global economic adviser, the former Federal Reserve Vice chairman and of course Columbia University professor as well.

[Bloomberg Tech Announcer]

AI is entering its most consequential phase where scale, safety and sovereignty will determine who leads and who lags. Join Bloomberg Tech in London on November 2nd and 3rd as global leaders across business, finance and policy examine the defining trade offs shaping the future of AI. Thank you to our presenting sponsor Salesforce and supporting sponsors Ida Ireland and Schneider Electric. Learn more at bloomberg live.com/tech London the

[Karen Moscow]

Bloomberg this Weekend Podcast News, Politics and the lighter side of Bloomberg. The great wealth transfer includes 570 billion doll and classic cars.

[Richard Clarida]

I'm not in a position to be inheriting any classic cars.

[Karen Moscow]

You? No. But my brother did inherit my non classic car when I moved to New York so he still has not paid me for it. Coming for you Joey. The Bloomberg this Weekend Podcast subscribe today on Apple, Spotify or wherever you listen.