The Federal Reserve is obliged to prevent future financial crises and even when monetary policy is zero lower bound the Fed is able to promote expansion, Federal Reserve Board Vice Chairman Stanley Fischer said Monday.
Officials are obligated “to try to minimize the regulatory and other burdens placed on the private sector,” Fisher said, noting, “we have a no less important obligation to try to prevent another financial crisis.”
Critics, he said, claim quantitative easing lost effectiveness “over the years, and should no longer be used,” according to prepared text released by the Fed. “But I regard it as significant with respect to the effectiveness of QE that the taper tantrum in 2013, apparently caused by a belief that the Fed was going to wind down its purchases sooner than expected, had a major effect on interest rates.”
Further, Fischer said, “I believe that central banks still have the capacity through QE and other measures to run expansionary monetary policies, even at the zero lower bound.”
