Powell Questioned on Financial Stability

Q: Can you walk us through how you think about financial stability, esp re meeting the dual mandate. Would financial stability concerns in and of themselves be enough to warrant a rate hike?

A: Powell reiterates new language in longer-run statement. "Today we said we'd be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of our goals. But you asked specifically about financial stability.

One thing I would say is that monetary policy should not be the first line of defense on financial stability." (Cites macroprudential tools etc).

"Policy decisions reflect the balance of risks including risks to the financial system that could impede the attainment of the committee's goal so the test would be, does a majority of the committee feel that monetary policy is triggering that and that would be the test. It's not something that we've done. We do monitor financial stability concerns, of course, intensely and regularly. We try to use other tools on them but we do keep them in mind as we think about monetary policy."