NEW YORK, March 27 (Reuters) - 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 hurt emerging-market economies over the last year.
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.
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."
One area to be improved however is central banks' need for access to large foreign exchange reserves, especially U.S. dollars, for use in times of stress, he said.
"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 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."
Reporting by Jonathan Spicer; Editing by Meredith Mazzilli