Consequently, even if we were to foster somewhat larger movements in short-term rates to address changes in stock prices, I doubt that investors’ perceptions of equity risks would be much affected and thus that equity prices would be meaningfully influenced. In short, monetary policy should focus on the broader economy and on pending inflationary or deflationary imbalances.
Should changes in asset prices foster economic imbalances, as they appear to have done in recent years, it is the latter we need address, not asset prices.