Tighter financial regulation in the United States is needed to avoid an increase in excessive risk and asset bubbles in markets as the Federal Reserve keeps interest rates low, two senior Fed officials told the Financial Times in an article published Saturday. .
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Boston Fed President Eric Rosengren told the newspaper that the Fed lacked enough tools to prevent companies and households from taking the “excessive lever”
“If you want to pursue a monetary policy … that applies low interest rates for a long time, you want a strong financial supervisor so that you can limit the amount of excessive risk that arises at the same time,” FT quoted him as saying.
“Otherwise, you are much more likely to find yourself in a situation where interest rates can be low for a long time but counterproductive,” Rosengren said.
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Minneapolis Federal Reserve President Neil Kashkari said stricter regulation was needed to avoid repeated Fed market interference.
“I don’t know what the best political solution is, but I know we can’t just keep doing what we did,” he told the newspaper.
“As soon as there is a risk that strikes, everyone runs away and the Federal Reserve has to step in and save this market and that’s crazy. And we have to look at it firmly,” he said.
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A spokesman for the Federal Reserve in Boston confirmed Rosengren’s remarks to the Financial Times, adding that he was interviewed on October 8. Kashkari was not immediately available to comment on the article, published on Saturday.
(Report by Kanishka Singh; Editing by Sonia Hepinstal)