Fed's Yellen says any changes to Volcker Rule should be "modest"
Updated : 15:46
The head of America's central bank defended the financial regulations put in place in the aftermath of the Great Financial Crisis, arguing that consideration had been taken to balance the gains achieved for the broader economy in terms of increased stability versus the possible negative effects they might have on lending and economic growth.
Her speech at Jackson Hole may have taken some market observers who had been hoping for further hints on the near-term outlook for monetary policy or current valuations in financial markets by surprise.
Ironically nonetheless, her silence on such matters may have played a hand in the subsequent rise in the single currency, which as of 1545 BST was higher by 0.53% to 1.1862.
"Our more resilient financial system is better prepared to absorb, rather than amplify, adverse shocks, as has been illustrated during periods of market turbulence in recent years.
"Enhanced resilience supports the ability of banks and other financial institutions to lend, thereby supporting economic growth through good times and bad," she said.
Yellen went on to call for policymakers not to forget the lessons of the crisis, even as she admitted that eventually "the all-too-familiar risks of excessive optimism, leverage, and maturity transformation reemerging in new ways that require policy responses" will reappear.
Nevertheless, she did see some scope for simplifying some aspects of the Volcker rule - which limits so-called proprietary trading by banking firms - but recommended that any changes by modest, arguing that in any case the regulations had made the associated market dealers and banks more resilient.
Her speech appeared to echo that of her number two at the central bank, vice-president Stanley Fischer, who in an interview with the Financial Times on 15 August argued against rolling back post-crisis financial regulations, describing such an attempt as "mind-boggling", adding that that the US political system "may be taking us in a direction that is very dangerous."