Richard H Clarida: Sovereign markets, global factors

Speech (via webcast) by Mr Richard H Clarida, Vice Chair of the Board of Governors of the Federal Reserve System, at "Fostering a Resilient Economy and Financial System: The Role of Central Banks" 25th Annual Financial Markets Conference, sponsored by the Center for Financial Innovation and Stability, Federal Reserve Bank of Atlanta, Amelia Island, FL, 17 May 2021.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Good morning, and thank you, Raphael. I am delighted to participate in the 25th Financial Markets Conference, sponsored by the Federal Reserve Bank of Atlanta, which this year focuses on the role of central banks in fostering a resilient economy and financial system.

Central banks can indeed make important contributions to the resilience of the economy and the financial system. In the case of the Federal Reserve, our responsibilities include ensuring that banks are well supervised and regulated, working with other government agencies through the Financial Stability Oversight Council to promote financial stability, and, of course, conducting a U.S. monetary policy that aims to achieve our dual-mandate goals of maximum employment and price stability. As the title of my talk suggests, my remarks today will focus on the importance of some specific global financial linkages that are relevant to the execution and communication of U.S. monetary policy aimed at achieving our domestic mandates.

Signs of financial globalization are abundant and evident across markets for many asset classes. But why and in what possible ways is financial globalization relevant for national monetary policies charged with achieving domestic mandates? A comprehensive and complete answer to this fundamental question is, of course, beyond the scope of a single speech, and so in my remarks today, I will focus specifically on two ways in which the integration and globalization of sovereign bond markets is relevant to the execution and communication of national monetary policies.