德意志银行-美国经济-us economic perspectives：the fed’s evolving views on financial conditions-20170713-deutsche bank.pdfVIP

Deutsche Bank Research North America Economics Date United States US Economic 13 July 201 Perspectives The Feds evolving views on financial conditions ■ In recent weeks, various forms of Fed communication have indicated Matthew Luzzetti, PhD some discomfort with elevated risk asset valuations, compressed risk Senior Economist premia, and an easing of financial conditions even as the Fed has raised +1-212-250-6161 rates. The implication has been that easing financial conditions and related financial stability concerns may be an additional consideration that helps to keep the Fed on its tightening path in the coming quarters. ■ Rather than viewing these statements as a one-off response to a unique macro and financial backdrop, there are at least two reasons why financial conditions and financial stability considerations are likely to play a more important role in monetary policy decisions in the years to come. First, low policy rates require unconventional monetary policy responses, which are likely to make periods of broad risk premium compression and elevated risk asset valuations more likely in the future. Second, low policy rates imply that central banks have less room to “clean up the pieces” from a popped bubble, making preventive measures, such as policy rate increases, more appropriate on the margin. This more active role for monetary policy would mark a departure from traditional Fed views. ■ We take a modest first step in trying to operationalize how monetary policy should respond to financial conditions in light of this potential re-