Fed Chair Yellen calls for research on effectiveness of unconventional policy tools

WASHINGTON – Federal Reserve Chair Janet Yellen is stressing the need to review the unconventional monetary policies that central banks around the world deployed in response to the 2008 global financial crisis.

She said Thursday that the post-crisis period offers policymakers an opportunity to assess the effectiveness of the tools and better understand the impact of new regulation.

“Policymakers have to carefully weigh the advantages and disadvantages of alternative monetary implementation frameworks in the presence of new policy tools,” Yellen said in remarks at a two-day research conference sponsored by the Fed.

Policymakers should also be “mindful of new channels for monetary policy transmission that may have emerged from the intricate economic and financial linkages in our global economy that were revealed by the crisis,” she said.

In her brief remarks, Yellen did not address current economic conditions or future policy moves by the Fed.

Last week, Yellen said that an interest rate hike at the Fed’s next meeting in December was a “live possibility.” The Fed has kept its benchmark rate at a record low near zero for the past seven years.

Following a report Friday that employers added a stellar 271,000 jobs in October, many economists now believe a rate hike at the Dec. 15-16 meeting is likely. It would be the first rate increase in nearly a decade.

At a separate conference Thursday, Jeffrey Lacker, the president of the Fed’s regional bank in Richmond, said that he believed the Fed’s ability to control inflation is unchanged, despite questions over whether the Fed’s powers over inflation have weakened from changes to the financial system since the financial crisis and recession.

Lacker has been the sole dissenter at the Fed’s past two meetings, arguing for an immediate boost in interest rates.