Fed's Rosengren: Low
interest rates pose financial stability risks
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[June 20, 2017]
By Lindsay Dunsmuir
(Reuters) - Boston Fed President Eric Rosengren said on Tuesday that the
era of low interest rates in the United States and elsewhere poses
financial stability risks and that central bankers must factor such
concerns into their decision-making.
"Monetary policy is less capable of offsetting negative shocks when
rates are already low," Rosengren said in a speech at a conference on
macroprudential policy in Amsterdam jointly organized by the Dutch and
Swedish central banks.
In particular, he said, the yield curve will be sensitive to the actions
of policymakers when removing monetary accommodation.
"Reach-for-yield behavior can make financial intermediaries and the
economy more risky," Rosengren said. He noted financial intermediaries
will need to factor in the possibility of lower rates, particularly
during economic downturns, and flatter yield curves.
The Boston Fed chief did not mention the U.S. central bank's decision to
raise rates last week or the U.S. economic outlook in his prepared
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The Federal Reserve Bank of Boston's President and CEO Eric S.
Rosengren speaks during the "Hyman P. Minsky Conference on the State
of the U.S. and World Economies", in New York, April 17, 2013.
Earlier, at the same conference, Fed Vice Chair Stanley Fischer warned that
while the United States and other countries have taken steps to make their
housing finance systems stronger, more needs to be done to prevent a future
Rosengren called on central bankers to factor financial stability into
policymaking and in their regulatory supervision.
"They have implications for monetary policy responsiveness to negative shocks,"
(Reporting by Lindsay Dunsmuir; Editing by Chizu Nomiyama)
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