"The expectation of gradual policy normalization should reduce the likelihood of outsized movements in interest rates." — Jerome Powell

If investors avoid the Treasury market, we could be unable to pay off maturing securities, which would mean an immediate default. Market participants generally agree that even a brief default would create potentially catastrophic risks to the financial system, like the meltdown of 2008.

A digital currency issued by a central bank would be a global target for cyber attacks, cyber counterfeiting, and cyber theft.

While the move to central clearing has made the system safer, we need to make sure that the central counterparties have the resources and risk-management practices to withstand plausible but severe shocks.

Over the longer run, advanced economy policy actions that strengthen global growth and global trade will benefit the EMEs as well.

The Federal Reserve is not charged with designing or evaluating proposals for housing finance reform. But we are responsible for regulating and supervising banking institutions to ensure their safety and soundness, and more broadly for the stability of the financial system.

Risk management systems and controls may discourage or limit certain revenue-generating opportunities. Failure to ensure the independence of these functions from the revenue generators and risk takers has been shown to be dangerous, and this is something for which the board is accountable.

Alignment of business strategy and risk appetite should minimize the firm's exposure to large and unexpected losses. In addition, the firm's risk management capabilities need to be commensurate with the risks it expects to take.

The FOMC has considerable control over short-term interest rates. We have much less influence over long-term rates, which are set in the marketplace.

Showcase

Show all

The expectation of gradual policy normalization should reduce the likelihood of outsized movements in interest rates.