New York Federal Reserve Chairman John Williams said on Wednesday that he still believes that monetary policy is not the best tool to deal with risks to financial stability and that policymakers should take steps to increase resilience of sectors such as the Treasury market.
“For monetary policy to be most effective, financial markets must function properly,” Williams said in a speech prepared for a Treasury market conference at the New York Fed.
“Using monetary policy to mitigate financial stability vulnerabilities can lead to unfavorable outcomes for the economy,” Williams said, adding that “monetary policy should not try to do everything and focus on nothing.”
Williams did not comment on the near-term outlook for monetary policy in his prepared remarks. The president of the New York Fed is also vice chairman of the Federal Open Market Committee (FOMC).
But Williams said that amid the current backdrop of high inflation, the world’s central banks are taking “strong action” to reduce price pressures.
“Restoring price stability is of paramount importance because it is the foundation of sustained economic and financial stability. Price stability is not an option, it’s a must,” he said.
Williams said the Fed and markets need to work together to find solutions that improve market resilience.
Source: CNN Brasil
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