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Since the financial crisis, many global central banks including
the Fed have not only pinned short-term interest rates at or
near zero but have also bought massive amounts of bonds and
other securities in an effort to stimulate investment and
hiring.
Such unconventional tactics, Bullard suggested, may not be as
effective as traditional modes of monetary policy.
"If unconventional monetary policy is ineffective, then the
global equilibrium may be overly volatile,” Bullard, a voting
member of the Fed's policy-setting committee, said in remarks
prepared for delivery to a monetary policy at Stanford
University's Hoover Institution.
Examples of such volatility may include market reaction to the
so-called taper tantrum in 2013, to the prospect of further
easing by the European Central Bank during the fall of 2014, and
the surprise devaluation of China’s currency in August 2015.
Such pronounced market reactions may argue for better
coordination among central banks, at least while they are
relying on unconventional policies, Bullard suggested. When
central banks are using conventional policy, the benefits of
international monetary policy coordination are few, he said.
(Reporting by Ann Saphir; Editing by Diane Craft)
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