Policymakers are uncertain whether actions taken to this point will be sufficient to “restart the flow of credit” since “we have no reliable precedents for the current situation, Federal Reserve Board vice chairman Donald L. Kohn said, adding flexibility will be key going forward.
“Policymakers are operating in a highly uncertain environment, one marked by a huge amount of unquantifiable risks,” Kohn said in a speech at the College of Wooster Friday, according to prepared text released by the Fed.
“Most people, including policymakers, did not anticipate the depth, breadth, and severity of the financial meltdown and economic downturn,” he said. “We have had to remain very flexible and open to policy actions that had no precedent. And all of us — the Federal Reserve, the administration, and the Congress — must continue in this posture. We must keep our ultimate objectives for the economy firmly in mind — sustained recovery to high levels of output and employment with price stability. We will continue to adapt our policies as necessary to accomplish these objectives.”
