However, it is important to understand that exchange rate is neither a first-best solution nor a sufficient tool for addressing the challenges of structural inflation that we face today. Ultimately, fiscal policy would need to work towards expediting supply-side responses and keeping private consumption demand in reasonable control. Monetary policy would need to be cautious in the interim.
Thus, so long as we have a federal guarantee of deposits, Federal Reserve guarantee of intraday payments over Fedwire, and other elements of the safety net -- and, therefore, so long as there is a need for federal regulation of banks -- such regulation should entail a choice of that regulator at the federal level.