As in the previous example, it will be more difficult for monetary policy to fulfil its task – in this case to raise inflation to the target – without the support of a more expansionary fiscal policy. If the task of fiscal policy is to stabilise public debt, monetary policy will receive such support. When government interest costs decrease, taxes will be reduced or expenditures increased, and this is also something that economic agents expect. Fiscal policy and monetary policy will then again be pulling in the same direction by interacting to raise demand and inflation.11 However, as the regime of an active monetary policy and a more passive fiscal policy has been applied in practice in recent decades, it is not clear that this will be the case. “Keeping public finances in good order” has often been equated with “making sure that debt does not increase”. A shrinking government debt, on the other hand, is generally perceived as something that is always positive and not as something that creates room for a more expansionary fiscal policy. However, from a macroeconomic perspective, such an asymmetry in the view of the task of fiscal policy is not entirely unproblematic.12  10 In an extreme case, it may not only be difficult but impossible. Interest rate increases become counterproduc-  tive and contribute to inflation rising instead.
William C Dudley: Reforming culture and behavior in the financial services industry - expanding the dialogue Opening remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the conference "Reforming Culture and Behavior in the Financial Services Industry: Expanding the Dialogue", Federal Reserve Bank of New York, New York City, 20 October 2016. * * * Welcome to the Federal Reserve Bank of New York, and to our third conference focused on culture within the financial services industry. It is encouraging to see all of you in attendance today—in particular, the many non-executive directors, representatives from the investor community, and foreign supervisors who have joined us to help broaden and deepen the dialogue. Thank you for your participation. As always, what I have to say today reflects my own views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System.1 The evidence is pervasive that deep-seated cultural and ethical problems have plagued the financial services industry in recent years. Bad conduct has occurred in both investment banking and securities market activities as well as in retail banking.2 This has eroded the industry’s trustworthiness. This erosion impedes the ability of the financial services industry to do its job. That job is financial intermediation—to facilitate the efficient transfer of resources from savers to borrowers, and to help customers manage the financial risks they face. Verification—whether through regulation or internal controls—is an expensive substitute for trustworthiness.