Pursuits
Fed’s Williams Prefers MBS Buying to ECB Tactics in Next Crisis
- Purchases gave ‘bigger bang for the buck’ than Treasuries
- Low ‘natural rate’ could limit ammunition to fight crises
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When the next crisis comes, don’t expect Federal Reserve Bank of San Francisco chief John Williams to try persuading his colleagues to pull a Mario Draghi.
The European Central Bank president has gotten creative with monetary policy as euro-area growth and inflation have remained sluggish despite rock-bottom interest rates. He’s tried charging banks for overnight deposits to encourage them to lend the cash instead, doling out long-term loans at ultra-low costs to credit institutions, and adding corporate bonds to his quantitative-easing program. He’s also employed measures that the Fed has also used, like signaling policy stance through forward guidance.