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00:00WE WATCH IT CAREFULLY. > > STOCK MARKET TURMOIL, WHICH WE HAVE HAD SOME VOLATILITY THE LAST NUMBER OF WEEKS, A NUMBER OF US WATCH MARKETS VERY CAREFULLY. HOW DOES IT AFFECT THE THINKING OF THE FOMC IN TERMS OF ANALYSIS, IMPLICATIONS FOR MONETARY POLICY? > > WE ARE LOOKING MAINLY AT THE REAL ECONOMY, UNEMPLOYMENT, GROWTH. FINANCIAL CONDITIONS AND MARKET ACTIVITY MATTERS A LOT FOR THAT. IT IS NOT JUST THE EQUITY MARKET. IT IS THE DEBT MARKET AND LEVELS OF INTEREST RATES AND CREDIT SPREADS. THEY ALL MATTER. WE MONITOR ALL OF THAT CAREFULLY. THE EQUITY MARKETS , IT IS A HIGH-PROFILE THING. IT MATTERS FOR THE ECONOMY. COMPANIES FINANCE IN THE EQUITY MARKETS AND CONSUMERS OWN EQUITIES. WHEN THEY ARE HIGH, PEOPLE WILL SPEND A LITTLE. IT IS NOT A BIG CHANGE. YOU WOULD NEED TO THINK THE INCREASE IN EQUITY VALUES IS SUSTAINABLE AND SUSTAINED WHERE THEY WILL SPEND MUCH OUT OF THEIR WEALTH, BUT THERE IS AN EFFECT. WHEN PRICES GET DOWN OR GO VOLATILE, WE PICK UP AN EFFECT, BUT IT IS ONE OF MANY FACTORS THAT GOES INTO A LARGE ECONOMY. I SAY IT IS ONE OF MANY. ALONG WITH THAT, CREDIT SPREADS, HEALTH OF THE CREDIT MARKETS, FIXED INCOME SPREADS, HOW DOES THAT AFFECT OUR TAKING? WITH THE TURMOIL, THEY HAVE HELD IN PRETTY WELL. HOW DOES THAT AFFECT OUR THINKING IF THAT SITUATION CHANGED AND YOU SAW CREDIT SPREADS GAP OUT? > > CREDIT SPREAD IS THE INCREASE. IF THE TREASURY BORROWS HERE, PRIVATE SECTOR COMPANIES WILL BORROW HIGHER. THE DIFFERENCE BETWEEN THE RATES IS CALLED A CREDIT SPREAD. THEY HAVE BEEN VERY TIGHT, WHICH IS TO SAY INVESTORS ARE FEELING OPTIMISTIC, AND THEY ARE NOT GETTING PAID A LOT TO TAKE THE INCREMENTAL RISK. CREDIT SPREADS HAVE BEEN FAIRLY LOW. THAT IS PROBABLY BECAUSE THE ECONOMY HAS BEEN SO GOOD. IT IS SOMETHING WE MONITOR. WHEN CREDIT SPREADS ARE LOW, THEY CAN MOVE QUICKLY AND THAT CAN HAVE NEGATIVE EFFECTS. BEGIN FINANCE AT LOW RATES ALSO. > > A NUMBER OF BANKERS IN THIS ROOM, OBVIOUSLY WE DO A LOT OF

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Fed's Powell Says Market Volatility Is One of Many Risks

Federal Reserve Chairman Jerome Powell comments on the impact of stock market volatility and credit spreads on monetary policy at the Federal Reserve Bank of Dallas Global Perspectives Speaker Series in Dallas. (Source: Bloomberg)

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