Fed Mester comments on financial stability risk

Today is full of speeches by Fed bankers. After James Bullard, it was time for comments from Loretta Mester, head of the Cleveland Federal Reserve. Mester warned of a sudden increase in financial stability risks in opposition to J.Bullard's position, which pointed to still relatively low stability risks, a model created by the St.Louis Federal Reserve was also supposed to reflect. 

Here is what Loretta Mester conveyed:

• The United States needs well-functioning financial markets, so the Fed needs to address areas of weakness in this area as soon as possible;
• Financial market opacity and structural vulnerabilities are nothing new, but the current economic environment raises the stakes of risk;
• Declining liquidity reflects an uncertain economic outlook. The treasury market has known structural vulnerabilities. Short-term funding markets are also still vulnerable;
• As a priority, the Fed needs to increase transparency, including in the non-bank sector. Financial stability risks are difficult to assess at the moment; 
• The UK 'gilt' event may serve as a warning that previously unseen volatility could emerge when interest rates rise;
• Philip Jefferson, a member of the Fed's board of directors, indicated that low inflation is key to maintaining long-term economic growth.

Michelle Bowman, who sits on the Federal Reserve's board of directors, was also scheduled to speak today, but decided to touch on other topics and not comment on the monetary policy situation.