Boston Fed President Eric Rosengren said Tuesday that low interest rates do pose financial stability concerns that central bankers and the private sector must take seriously. In a speech in Amsterdam to a conference co-sponsored by the central banks of Sweden and the Netherlands, Rosengren said lower rates may be a more permanent feature on the economic landscape because they reflect broad population trends. As a result, financial firms, such as insurance companies, "will need to factor in the possibility of lower rates, particularly during economic downturns and flatter yield curves." For their part, central bankers must understand that financial stability concerns "have implications for monetary policy responsiveness to negative shocks." And supervisory policies also need to factor in greater macroeconomic risk, he added.
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