Tags: Bernanke | Central | Banks | Bubbles

Bernanke: Central Banks May Need to Burst Asset Bubbles

Tuesday, 18 Oct 2011 01:52 PM

Federal Reserve Chairman Ben Bernanke said on Tuesday that central banks may need to resort to monetary policy to combat asset bubbles, although regulation should be a first line of defense.

"The possibility that monetary policy could be used directly to support financial stability goals, at least on the margin, should not be ruled out," he said at a conference at the Boston Federal Reserve Bank.

Bernanke did not directly discuss the outlook for the U.S. economy or monetary policy in his speech, which offered thoughts about how central banking might shift in the wake of the financial crisis.
__________________________________________________________

Editor's Note: Exposed: You Owe It to Yourself to Learn What Obama and Bernanke Are Hiding From Americans
This gripping Newsmax investigative report reveals the truth about America's economic future and the disastrous path that Obama’s and Bernanke’s reckless policies are taking us down. Watch, learn, and receive a free Survival Guide ($49 value) for your personal financial future. Click Here Now.

__________________________________________________________

The crisis has brought the goal of financial stability into co-equal status with macroeconomic health as a central banking goal, elevating the importance of regulation to guard against systemic risks, Bernanke said.

However, he said it was too soon to say how effective regulation would be in warding off financial imbalances.

As for monetary policy, he said it was unlikely central banks would move away from the current focus on so-called flexible inflation targeting, in which they make clear their inflation goals as a way of ensuring the public's expectations of inflation remain low.

Bernanke said that in the United States, policymakers were still striving to refine their communications. "The (Fed) continues to explore ways to further increase transparency about its forecasts and plans," he said.

To help spur stronger growth, the Fed is considering ways to assure financial markets it won't tighten financial conditions any time soon.

It has already said it expects financial conditions will warrant extremely low interest rates at least through the middle of 2013, and officials are discussing setting explicit goals for inflation and unemployment.

Despite an aggressive easing of monetary policy by the Fed, the U.S. economy continues to suffer from the effects of a burst real estate bubble.

Economists have long debated whether central banks should prick perceived asset bubbles when they are forming.

Before the financial crisis, most central bankers, Bernanke included, argued against using interest rates to lean against bubbles.

While those views have softened, Bernanke said regulation, supervision and monitoring would remain "the first line of defense" against the threat of financial instability.

"The evolving consensus ... is that monetary policy is too blunt a tool to be routinely used to address possible financial imbalances," he said.

© 2017 Thomson/Reuters. All rights reserved.

 
1Like our page
2Share
Headline
Federal Reserve Chairman Ben Bernanke said on Tuesday that central banks may need to resort to monetary policy to combat asset bubbles, although regulation should be a first line of defense. The possibility that monetary policy could be used directly to support financial...
Bernanke,Central,Banks,Bubbles
1963
2011-52-18
Tuesday, 18 Oct 2011 01:52 PM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved