Hence, addressing the question of what it can and cannot do should be approached with modesty. Today, I would like to present my views on this issue by first discussing positive impacts expected from monetary policy. Second, I would like to examine potential negative effects. Third, I will touch on the need for time consistency to make policy reliable.
Beginning in 2013, the U.S. Financial Stability Oversight Council and the international Financial Stability Board, which I currently chair, expressed concern that the decline in unsecured shortterm funding by banks could pose serious structural risks for unsecured benchmarks such as LIBOR.4 To mitigate these risks and promote a smooth transition away from LIBOR, the Federal Reserve convened the Alternative Reference Rates Committee (ARRC) in November 2014.5 As I will describe further in a moment, the ARRC has worked to facilitate the transition from LIBOR to its recommended alternative, the Secured Overnight Financing Rate (SOFR).