Fed humor; We need tools to prevent the bubles our policies create
Eric Rosengren, president of the Federal Reserve Bank of Boston, told the Financial Times that the Fed lacked sufficient tools to “stop firms and households” from taking on “excessive leverage” and called for a “rethink” on “financial stability” issues in the US.
Mary Daly, president of the Federal Reserve Bank of San Francisco, this week told reporters that she did not see much connection between loose monetary policy and financial risks.
Sounds like the Fed is suddenly concerned about creating a Minsky Moment
Rosengren theorized that the “slow build-up of risk in the low-interest-rate environment that preceded the current recession” could likely contribute to a more difficult economic recovery.
“The increased risk build-up, such as the reaching-for-yield behavior in commercial real
estate or increased corporate leverage, make economic downturns including this one more
severe,” he said. “These are issues that I and others spoke about quite extensively in the years before the pandemic hit, in particular with respect to questions about the need for accommodative interest rates when the economy was doing well, and the potential for a build-up of financial stability risks.”