It is a pleasure to join you at Cato’s 28th Annual Monetary Conference. In preparing today’s remarks, I noted that this year’s topic of how monetary policy should deal with asset prices was also discussed here in 2008. The speakers at that time expressed a wide variety of views and opinions. The fact that this important question continues to resurface here and at other prominent meetings in recent years suggests that a consensus has yet to emerge. Today I will offer one policymaker’s views on a few of the key issues. And I do mean one policymaker’s views, as my remarks do not necessarily represent those of the Federal Reserve Board or my colleagues on the Federal Open Market Committee. It is probably only a modest stretch to say that the prevailing view among many, if not most, monetary policymakers has been that a central bank should not make asset prices a direct focus of monetary policy. 1 Yet, the housing boom, its subsequent collapse, and the financial crisis that followed are viewed as central elements that gave rise to the Great Recession. These events have once again renewed the debate about whether a central bank should give asset prices a direct role in policy. 2 The severity and financial nature of this recession has led many forecasters to anticipate a protracted period of modest economic growth, accompanied by a slo
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