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Mester, Loretta J. on 2018 May 18 at 03:00

The goals of monetary policy and financial stability are interconnected…. Financial stability is a necessary but not sufficient condition for macroeconomic stability.

The goals of monetary policy and financial stability are interconnected. Indeed, the FOMC’s statement on its monetary policy strategy says that the FOMC’s monetary policy decisions “reflect its longer-run goals, its medium-term outlook, and its assessments of the balance of risks, including risks to the financial system that could impede the attainment of the Committee’s goals.” Financial stability is a necessary but not sufficient condition for macroeconomic stability. On the other side of the coin, macroeconomic stability is an important contributor to financial stability, and well-formulated and well-communicated monetary policy supports financial stability. Mester, Loretta J.

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