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Disinterested · Jan 11, 2006, 04:30 pm

Fed must take asset prices into account on policy By Pedro Nicolaci da Costa
1 hour, 16 minutes ago

NEW YORK (Reuters) - U.S. monetary policy must take asset price fluctuations into account even if it cannot target them explicitly, New York Federal Reserve President Timothy Geithner said on Wednesday.

The comments set Geithner apart from others at the central bank who had been quicker to dismiss the impact of significant price rises in assets like stocks or housing.

Some economists worry that, like the stock market in the late 1990s, housing prices may haven gotten out of whack with the fundamental value of home assets after a five-year boom.

While some of his colleagues have argued that there is simply nothing the Fed can do about it, Geithner said action was indeed warranted under certain circumstances.

"When policy-makers have already witnessed a significant move in asset values and are confident in what that move means for the outlook, it (the Fed) should be prepared to adjust policy accordingly," Geithner told an economics luncheon at the Harvard Club.

Geithner also reiterated his concerns over the longer-term stability of the global financial system, saying that the calm of recent years should not be taken as a green light for complacency.

He said the U.S. current account deficit, and the eventual need for an adjustment, posed serious risks.

"It would be hard for anyone looking at the size of the U.S. current account deficit to not be worried," Geithner said.

http://news.yahoo.com/s/nm/20060111/...ed_geithner_dc

Protostar · Jan 11, 2006, 06:32 pm

Do you have an opinion on this?

Jan 11, 2006, 04:30 pm	#1 (permalink) (top)
Disinterested Go Speed Racer Location: In my mind Posts: 361	Fed must take asset prices into account on policy Fed must take asset prices into account on policy By Pedro Nicolaci da Costa 1 hour, 16 minutes ago NEW YORK (Reuters) - U.S. monetary policy must take asset price fluctuations into account even if it cannot target them explicitly, New York Federal Reserve President Timothy Geithner said on Wednesday. The comments set Geithner apart from others at the central bank who had been quicker to dismiss the impact of significant price rises in assets like stocks or housing. Some economists worry that, like the stock market in the late 1990s, housing prices may haven gotten out of whack with the fundamental value of home assets after a five-year boom. While some of his colleagues have argued that there is simply nothing the Fed can do about it, Geithner said action was indeed warranted under certain circumstances. "When policy-makers have already witnessed a significant move in asset values and are confident in what that move means for the outlook, it (the Fed) should be prepared to adjust policy accordingly," Geithner told an economics luncheon at the Harvard Club. Geithner also reiterated his concerns over the longer-term stability of the global financial system, saying that the calm of recent years should not be taken as a green light for complacency. He said the U.S. current account deficit, and the eventual need for an adjustment, posed serious risks. "It would be hard for anyone looking at the size of the U.S. current account deficit to not be worried," Geithner said. http://news.yahoo.com/s/nm/20060111/...ed_geithner_dc "Nothing is impossible, we just don't know how to do it yet." Cudmore, L.L. Larison

Jan 11, 2006, 06:32 pm	#2 (permalink) (top)
Protostar Hardcore Capitalist Location: North Carolina Posts: 759	Do you have an opinion on this? "I distrust those people who know so well what God wants them to do because I notice it always coincides with their own desires." . . . Susan B. Anthony