In addition to monetary policy outline, Powell reasserts view that financial stability risks remain ‘moderate’

In a widely reported speech on monetary policy and the future of interest rates, the chairman of the nation’s central bank also reiterated his view Friday that overall financial stability risks continue to be moderate.

“But we remain vigilant,” Federal Reserve Board Chairman Jerome H. (“Jay”) Powell said, speaking to the “Challenges for Monetary Policy” symposium, sponsored by the Federal Reserve Bank of Kansas City in Jackson Hole, Wyo.

Powell said that the Fed has not seen unsustainable borrowing, financial booms, or “other excesses of the sort” that occurred at times during the “Great Moderation,” the period before the “Great Recession” that began in 2007.

Reflecting on one economic theory – that as economic expansions continue and memories of previous downturns fade, risks are increasingly underappreciated – Powell said the Fed and regulators cannot prevent persons from taking excessive financial risks.

“But we can work to make sure that they bear the costs of their decisions, and that the financial system as a whole continues to function effectively,” Powell said.

Powell noted, as he has repeatedly in the past, that since the financial crisis earlier in this decade Congress, the Fed, and other regulatory authorities in the U.S. and around the world have taken substantial steps to achieve those goals. “Banks and other key institutions have significantly more capital and more stable funding than before the crisis,” he said.

He added that the Fed “comprehensively” reviews financial stability every quarter and releases its assessments twice a year to highlight areas of concern and allow oversight of its efforts.

FRB Chair Jerome H. Powell: Challenges for Monetary Policy