Yellen: No Need to Change Current Monetary Policy

Federal Reserve Chair Janet Yellen said there is no need to change current monetary policy to address financial stability concerns although she sees “pockets of increased risk-taking” in the financial system.

In a comprehensive salvo into the worldwide debate among central bankers over whether interest rates are a first-order tool to curb financial excess, Yellen came down against that idea and in favor of regulatory mechanisms.

“Monetary policy faces significant limitations as a tool to promote financial stability,” Yellen said today at the International Monetary Fund in Washington. “Its effects on financial vulnerabilities, such as excessive leverage and maturity transformation, are not well understood and are less direct than a regulatory or supervisory approach.”

Bloomberg

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