MNI BRIEF: Fed's Bullard Says Financial Stress Has Risen
St. Louis Fed president says Fed can balance monetary policy with financial stability.
Financial stress has risen since the outbreak of U.S. banking turmoil this month but the Federal Reserve has the tools to address financial stability concerns while still fighting to push inflation down with "appropriate" monetary policy, St. Louis Fed President James Bullard said Tuesday.
"Financial stress has been on the rise since then in the wake of recent bank failures and turmoil," Bullard wrote in a column. "The macroprudential policy response to these events has been swift and appropriate. Regulatory authorities have used some of the tools that were developed or first utilized in response to the 2007-09 financial crisis in order to limit the damage to the macroeconomy, and they’re ready to take additional action if necessary."
Bullard said "continued appropriate macroprudential policy can contain financial stress in the current environment, while appropriate monetary policy can continue to put downward pressure on inflation."
(See MNI INTERVIEW: Credit Crunch Looms On Bank Runs-Ex-Fed's Stein)