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 The Fed is mandated by Congress to pursue just two goals, maximum
employment and price stability, but since the 2007-2009 recession
has increasingly taken on responsibility for battling cracks in the
financial system.
"Almost always, these goals are complementary," Fischer said in
written testimony released on Wednesday for a U.S. Senate
confirmation hearing set for Thursday. "But each of them must be an
explicit focus of Fed policy."
The former chief of the Bank of Israel was chosen to be Fed Chair
Janet Yellen's second-in-command in part for his crisis-management
credentials, especially during a seven-year stint as the No. 2
official at the International Monetary Fund.
In his remarks, he also expressed support for Yellen's policy of
continued monetary accommodation to bring down overly high
unemployment and boost uncomfortably low inflation, "even though the
degree of expansion is being gradually and cautiously cut back" as
the Fed trims its massive bond-buying program.
Outside of those brief comments, Fischer's prepared remarks provided
few new clues on his outlook for monetary policy or the economy, and
investors will watch closely his testimony before the U.S. Senate
Banking Committee on Thursday, set to begin at 10 a.m. ET.
As nominee for Fed vice chair, Fischer would be expected to fall in
line with Yellen on most major policy issues. He has said he
believes the Fed's program of quantitative easing has been
effective.
Frustrated with the slow recovery from the Great Recession, the Fed
has kept interest rates near zero for more than five years and has
bought trillions of dollars in bonds to stimulate investment and
hiring even more.
While the central bank is now reducing the pace of its purchases,
worries are growing that the unprecedented accommodation has stoked
risky asset-price bubbles that could destabilize financial markets
and harm the economy again.
Some Fed officials have even suggested the Fed may need to tighten
policy earlier than otherwise to stamp out risks to financial
stability.
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But Yellen has so far steered clear of that conclusion, saying that
she believes supervision and regulation should be the Fed's first
line of defense against instability.
Fischer made it clear that he'll also be strongly focused ensuring
the Fed does "everything we can" to beef up bank supervision to
prevent another financial crisis.
Lael Brainard, a former deputy at the Treasury Department nominated
to be a Fed governor, and Fed Governor Jerome Powell, who has been
renominated, also stressed the importance of financial stability in
their prepared testimony.
"I cannot think of a more important moment for the work of the
Federal Reserve in promoting price stability and maximum employment
alongside financial stability," Brainard said.
Powell said: "The task for monetary policy will be to provide
continued support as long as necessary, and to return policy to a
normal stance over time without sparking inflation or financial
instability."
Confirmation of the nominees would bring the Fed's policymaking
panel up to 11, just shy of its full 12-member maximum, with the
pending departure of Governor Sarah Bloom Raskin. The Senate on
Wednesday confirmed her to be the No. 2 official at the Treasury
Department.
Fed policymakers gather in Washington next week to discuss policy.
(Reporting by Ann Saphir and Jonathan
Spicer; editing by Chizu Nomiyama and Paul Simao)
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