I would like to thank the New York Fed for inviting the public (virtually) to the conference last Friday on financial stability considerations for monetary policy, not the least because it allowed the masses to hear the “state of the art” on the interaction of markets and monetary policy. With two of the three of the FOMC’s holy trinity attending (Lael Brainard and John Williams), I assume that the opinions of the researchers who spoke at the conference matter a little to the policymaking class.
As I have written previously, we are probably morphing from inflation as the primary objective of the Fed to financial stability (or instability) as the most immediate consideration. Recent actions of the Bank of England and the Reserve Bank of Australia show they are already in the middle of a soft pivot toward easier policy. Others are likely to follow when the banks squeal in pain.
The full note on this important topic can be downloaded at this link: LTA Thinking – It Ain’t Over Until The Banks Cry Uncle