MNI BRIEF: Fed's Williams Urges Shoring Up US Treasury Market

New York Fed President John Williams Wednesday pushed back against the notion that there is a trade-off between price stability and financial stability goals, and stressed the need to find solutions that strengthen the financial system.

"The time is now to find solutions that strengthen our financial system without compromising our monetary policy goals," said Williams, the FOMC vice chair, speaking at a conference on resiliency in the U.S. Treasury market. "If the Treasury market isn’t functioning well, it can impede the transmission of monetary policy to the economy."

"Using monetary policy to mitigate financial stability vulnerabilities can lead to unfavorable outcomes for the economy," he said. "Monetary policy should not try to be a jack of all trades and a master of none. There must be a better way." Regulators this year have ramped up efforts to reform the Treasury market including mandating central clearing. (See: MNI: US Treasury Clearing To Limit Contagion, Create New Risks)