Tighter U.S. financial regulations are needed to avoid rising excessive risk and asset bubbles in markets while the Federal Reserve maintains low interest rates, two senior Fed Financial Times officials said in an article published Saturday.
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Boston Fed President Eric Rosengren told the newspaper that the Fed did not have enough tools to prevent companies and households from taking on “excessive leverage”; and called for a rethinking of issues related to US financial stability.
“If you want to stick to a monetary policy … that applies low interest rates for a long time, you want to have a reliable financial oversight body to be able to limit the amount of excessive risk that occurs at the same time,” the FT quoted him as saying.
“(Otherwise) you are much more likely to find yourself in a situation where interest rates may be low for a long time, but will have the opposite effect,” Rosengren said.
US ECONOMY, FEDERAL POLICY IN “GOOD POSITION”, SAYS
Minneapolis Federal Reserve Chairman Neil Kashkari said there was a need for tighter regulation to avoid repeated Fed intervention in the market.
“I don’t know what the best political decision is, but I know we can’t just keep doing what we did,” he told the newspaper.
“As soon as the risk hits, everyone runs away, and the Federal Reserve must intervene and help this market, and it’s crazy. And we need to look closely at that,” he said.
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A spokesman for the Boston Federal Reserve confirmed Rosengren’s remarks to the Financial Times, adding that he had been interviewed on October 8. Kashkari was not immediately available for comment on the article published on Saturday.
(Report by Kanishka Singh; Edited by Sony Happystall)