* U.S. official wants better system of global liquidity
* Response to series of selloffs in emerging markets
(Adds background on policy, effects; more quotes)
By Jonathan Spicer
NEW YORK, March 27 While explicit policy
coordination among the world's central banks is unfeasible, a
more effective system should be developed to ensure they have
access to foreign currency reserves in times of stress, a top
U.S. Federal Reserve official said on Thursday.
"Monetary policy meant to suit everybody is likely in the
end to suit nobody," William Dudley, the influential head of the
New York Fed, said in a speech that pushed back against
criticism that aggressive U.S. policy accommodation has
recklessly hurt emerging-market economies.
Last spring, when Fed officials started discussing the
prospect of reducing their bond-buying stimulus, the currencies
and stocks of many emerging markets sold off sharply. The
selloff returned in countries like Turkey and Argentina earlier
this year once the Fed began trimming the purchases.
As emerging markets reeled in January, for instance, Reserve
Bank of India Governor Raghuram Rajan said the U.S. should pay
more attention to the rest of the world, and that policymakers
should "do what is right, rather than what is just right given
the circumstances of their own country."
The Fed however has continued to trim the stimulus and plans
to finally raise interest rates some time next year.
The hyper-accommodative U.S. policies were meant to depress
yields, and have since the 2007-2009 recession driven investors
to seek higher returns in riskier markets. Now that the policies
are being wound down, that tide of investment has turned.
AREAS FOR IMPROVEMENT
Dudley stressed that central banks need to tailor polices to
the needs of their domestic economies. And while the Fed in
particular could be more cognizant of the effects its decisions
have on the rest of the world, he warned "explicit coordination
looks neither feasible nor desirable."
Earlier on Thursday, St. Louis Fed President James Bullard
said there is little to be gained by international policy
coordination, but flagged "room for debate" on the issue.
Dudley said however that one area to be improved is central
banks' need for emergency access to large foreign exchange
reserves, especially U.S. dollars, when capital starts to
abandon a given economy.
"We could design a better global solution of collective
insurance - access to liquid resources in times of stress that
were not stigmatized and that could and would be used to
facilitate adjustment," Dudley, the effective No. 2 policymaker
at the Fed next to Chair Janet Yellen, said according to
prepared remarks at an internal New York Fed event.
"This could help reduce market volatility and dampen the
size of foreign exchange and other adjustments."
The current system, Dudley added, is "inefficient and often
ineffective" because the holdings are expensive and any central
bank that dips into those reserves sends a negative signal to
(Reporting by Jonathan Spicer; Editing by Meredith Mazzilli)