NEW YORK – While the Fed’s use of monetary “policy tools has been completely appropriate,” Federal Reserve Board Governor Sarah Bloom Raskin said it would have been nice if the Fed could have provided “precise quantitative information” for what each tool would do, but the effects of the tools are subject to “considerable uncertainty.”
“In my view, the deployment of our monetary policy tools needs to be carefully gauged, appropriately timed, and clearly communicated to the public,” Raskin told the University of Maryland Smith School of Business Distinguished Speaker Series, according to prepared text of her remarks, which were released by the Fed. “Moreover, to the extent that some factors may attenuate the usual effectiveness of monetary policy, there is a compelling case to identify and implement policy measures to mitigate those factors and thereby strengthen the effect of the monetary accommodation that we have already put in place. Finally, in light of the economic hardships that are facing our nation, I want to underscore that the Federal Reserve is fully committed to doing everything we can to promote maximum employment in the context of price stability. “
Despite pushing down interest rates, “the magnitude of the transmission to economic growth and employment has been somewhat more muted than I might have expected,” she said. She speculated the effectiveness may have been “attenuated” by some “unusual” factors, “including an excess supply of housing and impaired access to credit for many households and small businesses.”
Raskin said, “Even if the usual effectiveness of monetary policy is being attenuated by the factors that I have mentioned, that conclusion should not be taken as implying that additional monetary accommodation would be unhelpful. Indeed, the opposite conclusion might well be the case--namely, that additional policy accommodation is warranted under present circumstances.”
Despite some disagreement on the FOMC, she said, “I believe that the public can have a very high degree of confidence in the fundamental integrity and soundness of our decision-making process.”
