Fed's Powell Wary Of Greater Cooperation With Treasury

MarketWatch Pulse

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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