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"If
our macroprudential tools proved to be inadequate and financial
stability risks continued to grow, I believe monetary policy
should be on the table as a possible defense," Cleveland Fed
President Loretta Mester said in remarks prepared for delivery
in Sydney, adding that the Fed's key price stability and maximum
employment goals usually align with its desire for a stable
financial sector.
Mester is a voting member on Fed policy this year and has often
warned that waiting too long to raise rates could create risks
to financial stability. She did not use her speech in Sydney,
however, to comment on her outlook for the U.S. economy or
interest rate policy. Her remarks were focused on the financial
system and were very similar to those she delivered on June 4 in
Stockholm.
In the only notable departure from last month's speech, she
nodded to the Bank of England's decision to ease credit
conditions after the June 23 U.K. vote to leave the European
Union.
The move, she said, tests the use of macroprudential tools since
the financial crisis, but in this case rather than using them to
reduce financial stability risks they are being used to support
monetary policy goals, illustrating how closely linked monetary
policy and financial stability policy are.
(Reporting by Wayne Cole; Writing by Ann Saphir; Editing by
Leslie Adler)
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