Fed's Stein (moderate, FOMC voter): Concerns about financial stability should impact monetary policy; if the bond market indicates abnormal rise in risk taking then the Fed should tighten policy even at the risk of potential unemployment consequences
- "I am going to try to make the case that, all else being equal, monetary policy should be less accommodative -- by which I mean that it should be willing to tolerate a larger forecast shortfall of the path of the unemployment rate from its full-employment level -- when estimates of risk premiums in the bond market are abnormally low."
- These comments are conjectural and not meant as a comment or critique of current Fed policy.