Policymaking with a Diversity of Views

by Eric S. Rosengren, President & Chief Executive Officer
Remarks for a Panel Discussion on “Economics at the Federal Reserve Banks” at the American Economic Association Annual Meeting
Philadelphia, Pennsylvania
January 4, 2014

Summary

In a forum today at the American Economic Association's annual meeting in Philadelphia, Federal Reserve Bank of Boston President Eric Rosengren noted the diversity of views that flourish within the Federal Reserve.  He spoke alongside fellow Reserve Bank Presidents from the New York, Minneapolis, and Philadelphia Reserve Banks, on a panel moderated by Stanley Fischer, Distinguished Fellow at the Council on Foreign Relations.

Rosengren mentioned three areas where the Boston Fed has provided distinctive perspectives on economic issues: foreclosure prevention, financial stability, and monetary policy.  

Seeing foreclosures disproportionately impacting low- and moderate-income neighborhoods in 2007 led to focused research, and bank-hosted events where thousands of residential borrowers and their lenders worked to prevent additional foreclosures.  "The long lines of borrowers illustrated for the Boston Fed and other Reserve Banks that there was an opportunity to reach more distressed borrowers – and to focus policy discussions to address these problems," said Rosengren.

In terms of financial stability, during the financial crisis the Boston Fed hosted a System emergency liquidity facility addressing the run on money market funds.  The crisis, said Rosengren, "spurred interest in identifying and putting in place regulations that could help avoid a repetition of the problems experienced and the need for emergency measures."  The Bank has researched and continued to speak out about the ways the current structure of money market mutual funds "poses significant financial stability concerns."

Regarding monetary policy, Rosengren said the Boston Fed focuses on both elements of the "dual mandate" from Congress – employment as well as inflation.  "We have highlighted the high costs related to being below full employment for a long period of time.  And we have strongly argued that policymakers should be as concerned about inflation being too low as being too high, given the toll and persistence of deflation were it to emerge."

"With the inflation rate below target and the unemployment rate significantly above target, we believe strongly that monetary policymakers have the opportunity to be patient in removing accommodation, speeding up the process of achieving both elements of the Fed's dual mandate." 

"The work that I have highlighted today," Rosengren concluded, "illustrates our belief that data-driven research can also inform and guide policy actions.  Ultimately, our hope is to make a positive difference in these important areas."

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