Narayana Kocherlakota, Columnist

Three Antidotes to the Brexit Crisis

The Fed needs to boost capital, lower interest rates and make borrowing easier for banks.

July 6, 2016 at 3:09 PM UTC

Narayana Kocherlakota is a Bloomberg Opinion columnist. He is a professor of economics at the University of Rochester and was president of the Federal Reserve Bank of Minneapolis from 2009 to 2015.

Time to put up the defenses.
Photographer: Karen Bleier/AFP/Getty Images

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Britain’s vote to leave the European Union has put a lot of stress on global financial markets: Even as I write, investors’ flight to safety has pushed the yield on U.S. Treasury bonds down to levels that I would have deemed inconceivable just six months ago. In my view, the risk that financial turmoil will damage the economy is at its highest point since the twin European and U.S. debt crises of 2011.

Financial stability is often said to be the U.S. Federal Reserve’s third mandate, along with price stability and maximum employment. If Fed wants to play this role effectively, it will have to act quickly. I see three measures that it can take.