John Williams, Governor of the Federal Reserve Bank of New York, proposed that the practice of central banks influencing the economy through balance sheet policies should not be viewed as “using unconventional tools.” Williams said in a pre-preparation speech at an event in Amsterdam on Friday that people's understanding of monetary policy is usually limited to “the overly narrow view of setting short-term interest rates.” “This means that other monetary policy actions that have been adopted — such as forward-looking guidance and balance sheet policies — have been identified as 'unconventional actions', and are therefore being questioned to a certain extent,” he said. “This narrow understanding of monetary policy is contrary to the history of monetary economics and the practical traditions of central banks,” he added. At the time of the announcement, the Federal Reserve is facing criticism from some sectors this year due to asset purchase operations and the overall scale of its balance sheet. US Treasury Secretary Scott Bessent said in a recent article that after the 2007-2008 financial crisis, the Federal Reserve used “large-scale asset purchases as a monetary policy tool” against the backdrop of short-term interest rates close to zero. This practice distorted the market and “interfered” with the independence of the Federal Reserve. He characterized such asset purchases as “unconventional policy instruments.” Former Federal Reserve Governor Kevin Walsh also shared a similar view. Currently, he is one of the candidates US President Donald Trump is considering appointing for the next Federal Reserve Chairman. For a long time, Walsh has criticized the Federal Reserve's multiple debt purchase plans, and is particularly opposed to carrying out such operations during non-financial crises; in recent months, he also proposed that the Federal Reserve should reduce the size of its balance sheet. In his speech on Friday, Williams quoted relevant economic research as pointing out that even when short-term interest rates are extremely low, policies such as asset purchases are still effective. “These policies are not 'emergency', 'crisis responsiveness' or 'breaking the boat' measures, but rather are fully in line with the long-standing tradition of monetary policy theory and practice,” Williams said. He added, “Of course, how and when to apply these policies depends on the specific situation and the risks faced by policy makers. But this is a question of strategy and execution, not a matter of principle or strategy.”

John Williams, Governor of the Federal Reserve Bank of New York, proposed that the practice of central banks influencing the economy through balance sheet policies should not be viewed as “using unconventional tools.” Williams said in a pre-preparation speech at an event in Amsterdam on Friday that people's understanding of monetary policy is usually limited to “the overly narrow view of setting short-term interest rates.” “This means that other monetary policy actions that have been adopted — such as forward-looking guidance and balance sheet policies — have been identified as 'unconventional actions', and are therefore being questioned to a certain extent,” he said. “This narrow understanding of monetary policy is contrary to the history of monetary economics and the practical traditions of central banks,” he added. At the time of the announcement, the Federal Reserve is facing criticism from some sectors this year due to asset purchase operations and the overall scale of its balance sheet. US Treasury Secretary Scott Bessent said in a recent article that after the 2007-2008 financial crisis, the Federal Reserve used “large-scale asset purchases as a monetary policy tool” against the backdrop of short-term interest rates close to zero. This practice distorted the market and “interfered” with the independence of the Federal Reserve. He characterized such asset purchases as “unconventional policy instruments.” Former Federal Reserve Governor Kevin Walsh also shared a similar view. Currently, he is one of the candidates US President Donald Trump is considering appointing for the next Federal Reserve Chairman. For a long time, Walsh has criticized the Federal Reserve's multiple debt purchase plans, and is particularly opposed to carrying out such operations during non-financial crises; in recent months, he also proposed that the Federal Reserve should reduce the size of its balance sheet. In his speech on Friday, Williams quoted relevant economic research as pointing out that even when short-term interest rates are extremely low, policies such as asset purchases are still effective. “These policies are not 'emergency', 'crisis responsiveness' or 'breaking the boat' measures, but rather are fully in line with the long-standing tradition of monetary policy theory and practice,” Williams said. He added, “Of course, how and when to apply these policies depends on the specific situation and the risks faced by policy makers. But this is a question of strategy and execution, not a matter of principle or strategy.”