Monetary policy cannot cure all our economic ills and expecting it to do so may make things worse, Federal Reserve Bank of Philadelphia president and chief executive officer Charles Plosser said Monday.
He expressed concern that unrealistic goals are being assigned to monetary policy.
“Monetary policy is not going to be able to speed up the adjustments in labor markets or prevent asset bubbles,” Plosser said. “Attempts to do so may create more instability, not less.”
He said that expecting too much of monetary policy undermines its ability to achieve the one thing it’s well-designed to do: ensure long-term price stability.
