To achieve the primary objective of price stability, as Christine Lagarde simply and clearly put it, “the (effective) transmission of monetary policy is just as important as monetary policy itself”. And this transmission applies towards all economic players, along all financing channels, and in all countries. 3/5  BIS central bankers' speeches  Thus, as early as the critical phase in March, it was already essential (i) regarding interest rates, to support favourable financing conditions and to contain the adverse effects of strains on the financial markets, (ii) regarding volumes, to guarantee sufficient liquidity for business and households through bank channels, and lastly (iii) to limit the risks of financial fragmentation within the euro area. When we need to meet several intermediate objectives at the same time, we need to expand our range of instruments and strengthen their intensity. Here, economists often refer to the “Tinbergen principle”, but it does not necessarily require strict specialisation with one single instrument assigned to each objective. Our choice at the ECB is more pragmatic: since March, we, like the Fed and the Bank of England, have greatly expanded and strengthened our armoury of instruments and in so doing refuted all those – and remember there were a lot of them only a few months ago – who feared that the central banks were “running out of ammunition”. However, some of our instruments deal with the long-lasting, underlying low-inflation environment that preexisted the crisis – and which has not gone away. It is our “baseline game”, if you will.
William C Dudley: The economic and fiscal challenges facing Europe Testimony by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, before the Subcommittee on Domestic Monetary Policy and Technology, Committee on Financial Services, United States House of Representatives, Washington DC, 27 March 2012. *  *  *  Introduction Chairman Paul, Ranking Member Clay, and members of the Subcommittee, my name is Bill Dudley, and I am President of the Federal Reserve Bank of New York. It is an honor to testify today about the economic and fiscal challenges facing Europe, and the Federal Reserve’s efforts to support financial stability in the United States. Financial stability enables U.S. businesses and households to maintain their access to credit and ensures sustained economic growth. This is why promoting financial stability is an important objective of the Federal Reserve, and other central banks around the world. Let me preface these remarks by stating that the views expressed in my written and oral testimony are solely my own and do not represent official views of the Federal Reserve Board, the Federal Open Market Committee (FOMC) or any other part of the Federal Reserve System. Additionally, because I am precluded by law from discussing confidential supervisory information, I will not be able to speak about the financial condition or regulatory treatment or rating of any individual financial institution.