Financial Stability Factors and the Severity of the Current Recession [Annual Robert Glauber Lecture]

Abstract: With many central banks focused on keeping interest rates low for an extended period to achieve their mandates – for example in the last recovery – it is particularly important to watch for reaching-for-yield behavior and excessive risk-taking. Easy monetary policy requires more guardrails protecting against rising financial stability risks. Without financial stability governance and tools, recessions have the potential to be more severe and fall disproportionately on those that can least afford it. And the recessions are likely to be deeper and longer, requiring more fiscal and monetary stimulus than would otherwise be necessary. In sum: We need to place more attention on the severity of outcomes in recessions, which are made worse if we cannot or will not take action against emerging imbalances.

Keywords: financial stability; recovery; COVID-19; pandemic; financial imbalances; shock;

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Bibliographic Information

Provider: Federal Reserve Bank of Boston

Part of Series: Speech

Publication Date: 2020-11-10

Note: Eric Rosengren’s comments were based on a speech he delivered earlier in the day at the UBS European Virtual Conference 2020