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Fed's Stein talks policy and bubbles, but doesn't back a specific approach
October 18, 2013 / 8:35 PM / in 4 years

Fed's Stein talks policy and bubbles, but doesn't back a specific approach

BOSTON (Reuters) - An influential Federal Reserve governor said on Friday that monetary policy theoretically could be used to battle asset-price bubbles, but he did not specifically back that approach relative to two others he outlined.

Jeremy Stein, the U.S. central banker who in February gave a speech that set off debate over battling bubbles with tighter policies, on Friday only laid out three “schools of thought” on an issue that has simmered under the surface of the Fed’s extraordinary support for the U.S. economy.

Beyond using policy to tackle financial imbalances, Stein said another approach is relying on supervision and regulation. He said a third approach is “generally suspicious” of using policy or regulation to avoid bubbles and “emphasizes the difficulty of identifying emerging financial imbalances in real time.”

According to remarks prepared for delivery at a conference, he said: “The debate between these three schools gets a lot of attention at venues like this one -- and with good reason. It touches on issues that are not only of policy interest, but also connect to deeper and strongly held views about how the world works.”

Reporting by Richard Valdmanis; Writing by Jonathan Spicer and Ann Saphir; Editing by Leslie Adler

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