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Mix-Ansicht- Remarks by FED Governor Donald L. Kohn 22.04.05 - CRASH_GURU, 23.04.2005, 11:58
Remarks by FED Governor Donald L. Kohn 22.04.05
-->...Finally, there is the role that monetary policy plays in reacting to these imbalances and their inevitable unwinding. The Federal Reserve's mandate is to keep inflation low and stable and to promote full resource utilization, with the economy expanding at its maximum sustainable rate. Thus, anything that has the potential to threaten the stability of output and prices is of concern to us. These imbalances certainly affect the forces of supply and demand and have consequences for price stability. Nevertheless, their direct influence on monetary policy is limited: They are important to us in so far as they affect the macro economy, and in this regard they are just a few of the factors that the Federal Open Market Committee considers in assessing the prospects for the stability of prices and output. Hence, we should take into account the claim on resources implied by the federal budget, as we should the effect that housing wealth has on consumer spending and the economy more broadly. We should note the implications of changes in the exchange rate or borrowing rates by U.S. corporations that result from shifts in global investor sentiment. But, in the same vein, we should not hesitate to raise interest rates to contain inflation pressures just because it might set off a retrenchment in housing prices, just as we were willing to keep rates unusually low as house prices rose rapidly. Nor should we hesitate to raise rates because higher rates mean higher debt-servicing burdens for the current account, the fiscal authority, or households. In my view, our role is to anticipate as best we can the macroeconomic effects of imbalances and their correction and to respond to unexpected changes in asset prices and spending propensities as they occur. It is through such actions that we aim to achieve our objective of economic stability.
Amen...
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