Yellen: Rates shouldn’t be main tool to ensure financial stability

Comments on financial stability from Yellen at the IMF:

• Interest rates shouldn’t change over financial stability concerns
• Macroprudential regulation needs to play the primary role in financial stability
• There may be times monetary policy should adjust to address financial stability risks, should be clearly communicated
• US still needs to tighten bank use of short-term funding
• Increased risk-taking in corporate bonds and leveraged lending could cause future problems, needs monitoring

There isn’t anything tradeable here. No one was worried about the Fed hiking rates to ward off financial stability risks in the near-term. In the long-term it might be comforting but it doesn’t change the picture.