(Reuters) – Tougher U.S. financial regulation is needed to avoid the rise of excessive risk-taking and asset bubbles in the markets at a time when the Federal Reserve is keeping interest rates low, two senior Fed officials told the Financial Times in an article published on Saturday https://on.ft.com/3kesfsU.
Boston Fed President Eric Rosengren told the newspaper that the Fed lacked sufficient tools to prevent companies and households from taking on “excessive leverage” and called for a rethink on issues related to U.S. financial stability.
“If you want to follow a monetary policy … that applies low interest rates for a long time, you want robust financial supervisory authority in order to be able to restrict the amount of excessive risk-taking occurring at the same time,” the FT quoted him as saying.
“(Otherwise) you’re much more likely to get into a situation where the interest rates can be low for long but be counterproductive,” Rosengren said.
Minneapolis Federal Reserve President Neel Kashkari said there was a need for stricter regulation to avert repeated interventions in the market by the Fed.
“I don’t know what the best policy solution is, but I know we can’t just keep doing what we’ve been doing,” he told the newspaper.
“As soon as there’s a risk that hits, everybody flees and the Federal Reserve has to step in and bail out that market, and that’s crazy. And we need to take a hard look at that,” he said.
Neither Rosengren nor Kashkari were immediately available to comment on the article published on Saturday.
(Reporting by Kanishka Singh; Editing by Sonya Hepinstall)
