The idea that the U.S. Treasury and the Federal Reserve should cooperate more closely on debt management risks the independence of monetary policy, a top U.S. central banker said Tuesday. The proposal presented by several prominent economists including former Treasury Secretary Larry Summers at a conference at the Brookings Institution "seems to be to be fraught with risk for the Federal Reserve," said Federal Reserve Governor Jerome Powell at a discussion at the think tank. While current institutional arrangements "may be imperfect...history suggests a need for caution," Powell said. The paper argues that Treasury and the Fed were pulling in opposite directions during the central bank's bond-buying programs, limiting its impact. The authors propose that Treasury and Fed should put out a joint statement on debt management strategy.
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