The Federal Reserve has been asked to "do too much" to heal the U.S. economy and "will inevitably fall short," former Fed Chairman Paul Volcker cautioned Wednesday.
Speaking before the Economic Club of New York, Volcker said the Fed's independence and credibility are at stake, as the central bank engages in unprecedented stimulus efforts.Here's the transcript for Volcker's "Central banking at a Crossroad..." speech (10 page PDF)
The Fed is being asked to "accommodate misguided fiscal policies" and "deal with structural imbalances" while simultaneously balancing low inflation with stronger economic growth, he said.
It's just too much, Volcker said, urging the Fed to focus on keeping prices stable instead.
"Credibility is an enormous asset," he said. "Once earned, it must not be frittered away by yielding to the notion that a 'little inflation right now' is a good thing to release the animal spirits and pep up investment. "Inflation, once it starts, "is hard to control and reverse," and all too often, the Fed is too late to act, he added....MORE
HT: Euromoney whose whole post is worth a read.
