Claudio Borio, currently Head of the Monetary and Economic Department at the Bank for International Settlements (BIS) – in other words, the central banks’ bank – says of ultra-loose monetary policy, in my view quite correctly, that “The longer these policies and measures last, the worse the cost-benefit outcome will be.” Monetary policymakers should therefore not only have an eye on the risks to price stability, which are indicated by the commonly used projection models, but also be aware of the fact that financial instability can also jeopardise price stability.
My comments today reflect my own views and are not an official position of the Board of Governors or the Federal Open Market Committee. I would like to thank Daniel Yergin for his kind invitation to speak this evening at the CERAWeek conference.