Fed official says rates are last resort against financial risks

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The Federal Reserve should only as a last resort adjust interest rates to deal with financial instabilities thought to imperil the U.S. economy, and instead rely primarily on regulations and supervision, a top Fed official said on Saturday.

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"While my preference (is) to start with the macroprudential tools that can be implemented more promptly, the limits on these tools suggest that in some circumstances monetary policy might have to be used to address financial stability concerns," Cleveland Fed President Loretta Mester said in prepared remarks.

Addressing the American Economic Association conference, she added: "This is all the more reason" to ensure that the financial system is resilient in order to avoid such crises and allow the Fed to focus on its dual employment and inflation mandate.

(Reporting by Jonathan Spicer; Editing by Lisa Von Ahn)

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