(Reuters) - Neel Kashkari, president of the Federal Reserve Bank of Minneapolis and a critic of the Fed’s recent round of interest rate hikes, on Wednesday said the U.S. central bank is as well positioned now as before the 2007-2009 financial crisis to fight a downturn.
Kashkari made the comments in a public debate held by Intelligence Squared U.S. in New York City, in which he and Harvard University professor Jason Furman defended the notion that the financial system is safer than it was 10 years ago.
A live audience in New York, however, was unconvinced. After the 60-minute debate they sided, by a 22-point margin, with the pair that took the opposing view. It was not clear which part of Kashkari and Furman’s views they disagreed with.
Although low interest rates mean the Fed has less room to cut to offset a downturn, “we have other tools to also stimulate the economy,” Kashkari said, adding that the crisis gave the Fed important experience with non-traditional tools like quantitative easing.
“Over all on monetary policy... we are about even” compared to before the crisis,” Kashkari said. “The system is stronger and safer than it was going into that crisis,” Kashkari added, saying that banks and nonbanks alike are stronger than before. Furman added that even fiscal policy has as much room now as it did pre-crisis, in part because interest rates are lower.
Arguing against that idea was Harvard University economics professor Kenneth Rogoff, who contended that among other problems, the U.S. political system is currently not led by safe hands.
“Even if we had competent technocrats in other key positions outside the Fed, I’m not sure they’d be listened to,” Rogoff said. “If you feel safer about anything right now, you are dreaming.”
The rules of the debate gave the win to the side that changed more minds.
Kashkari and Furman failed to convince, and Rogoff’s team, won, with the backing of 57 percent of the audience.
Reporting by Ann Saphir; Editing by Leslie Adler