, Columnist
The Rules of the Game Are Changing on the Fed
Financial stability has become more than an equal alongside full employment and stable prices.
The Fed needs to watch the ebullience in markets.
When asked why his opinions frequently changed, economist John Maynard Keynes is said to have responded with some variation of "When the facts change, I change my mind." Well, it's time the Federal Reserve changed its thinking on monetary policy.
Economies are becoming increasingly driven by real and financial asset prices, meaning financial stability can no longer be relegated to the Fed's regulatory and supervisory role. Financial stability has become more than an equal alongside full employment and stable prices in the objectives of monetary policy.