Jerome Powell

There is no risk-free path for monetary policy.

The sale of Treasury bonds, notes, and bills finances the U.S. government, and those securities are, in turn, a primary vehicle for savings for a wide range of U.S. households. Treasury securities are also an important source of collateral within the financial system.

Higher capital requirements increase bank costs, and at least some of those costs will be passed along to bank customers and shareholders. But in the longer term, stronger prudential requirements for large banking firms will produce more sustainable credit availability and economic growth.

Emerging market economies have long grappled with the challenges posed by large and volatile cross-border capital flows.

All economic forecasts are subject to considerable uncertainty. There is always a wide range of plausible outcomes for important economic variables, including the federal funds rate.

Liquidity problems can occur in central clearing, even if all counterparties have the financial resources to meet their obligations, if they are unable to convert those resources into cash quickly enough.

A risk-insensitive leverage ratio can be a useful backstop to risk-based capital requirements. But such a ratio can have perverse incentives if it is the binding capital requirement because it treats relatively safe activities, such as central clearing, as equivalent to the most risky activities.

The Federal Reserve places great importance on our relations with the Bundesbank. Few such relationships have been as important, over the decades, in promoting financial stability and prosperity around the world.

My own experience is that the best outcomes are reached when opposing viewpoints are clearly and strongly presented before decisions are made.

If investors avoid the Treasury market, we could be unable to pay off maturing securities, which would mean an immediate default. Market participants generally agree that even a brief default would create potentially catastrophic risks to the financial system, like the meltdown of 2008.

While the move to central clearing has made the system safer, we need to make sure that the central counterparties have the resources and risk-management practices to withstand plausible but severe shocks.

Long experience, in the United States and in other advanced economies, has demonstrated that monetary policy is most successful when decisions are rendered independent of influence by elected officials.