In a speech, Fed Governor Christopher Waller robustly defended Fed’s tightening of monetary policy, rejecting arguments that such measures have unduly stressed the banking system.
Some critics have posited that Fed’s recent rates hikes significantly contributed to the distress and failures within the banking sector, suggesting that these factors should have been taken into account in the policy setting process.
Waller firmly dismissed these claims, stating, “Let me state unequivocally: The Fed’s job is to use monetary policy to achieve its dual mandate, and right now that means raising rates to fight inflation.”
“It is the job of bank leaders to deal with interest rate risk, and nearly all bank leaders have done exactly that,” he added.
He reinforced his stance by adding, “I do not support altering the stance of monetary policy over worries of ineffectual management at a few banks.”
He reiterated Fed’s commitment to its monetary policy objectives, which ultimately support a healthy financial system.
However, he did acknowledge the importance of Fed’s role in ensuring financial stability, affirming that it would continue to leverage its financial stability tools to prevent the accumulation of risks within the financial system and address any emerging strains when necessary.
