Financial instability should figure into policy-making -Fed's Dudley

NEW YORK, June 24 Mon Jun 24, 2013 9:26am EDT

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NEW YORK, June 24 (Reuters) - An influential Federal Reserve policymaker said on Monday that financial-system instability can impair the effectiveness of monetary policy, and the U.S. central bank must consider this when formulating its policies.

"The central bank has a major role to play in ensuring financial stability and should evaluate the stance of monetary policy in light of problems in the financial system that may impair the monetary policy transmission mechanism," New York Fed President William Dudley said in a speech in Basel, according to prepared remarks.

They were Dudley's first public comments since the Fed last week said it expected to reduce its asset purchases later this year and halt the stimulus program altogether by mid-2014, if the economy improves as forecast.

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