Never use rates to prick bubbles – Fed’s Williams

FXStreet (Mumbai) - San Francisco Fed President John Williams said on Thursday that the banks should refrain from using interest rate policy to address risks to financial stability. “Even as a last resort” policymakers should not use rates to avoid or prick bubbles.

“I am convinced that monetary policy should not be used to address risks to financial stability given the very real and sizable costs, not to mention that the potential benefits are anything but certain,” Mr. Williams said in remarks prepared for delivery Thursday at the Symposium on Asian Banking and Finance in Singapore.

His remarks come amid debate over whether central banks across the globe should consider raising interest rates to prick financial asset bubbles while they are forming.