it could happen, and they say it isn't yet clear how banking terms and conditions will evolve. there are a wide range of estimates trying to map this expected credit tightening into policy rate hikes. as of today, it isn't clear to me what the effect on the economy will be. 3 / 5 bis - central bankers'speeches implications for monetary policy let me turn to the implications for monetary policy. there is a lot of discussion about the next step for policy. there are three options : hike, skip, or pause. let me outline reasons why each of these options may be appropriate. one might lean toward hiking by focusing on the economic data and interpreting it to suggest that inflation and economic activity are not consistent with significant and ongoing progress toward the fomc's 2 percent inflation goal. based solely on the data we have in hand as of today, we are not making much progress on inflation. if one doesn't believe the incoming data will be much better, one could advocate for another 25 - basis - point hike as the appropriate action in june. alternatively, one might view the current and incoming data as supporting a hike in june but believe that caution is warranted because there is a high level of uncertainty about how credit conditions are evolving. another hike combined with an abrupt and unexpected tightening of credit conditions may push the economy down in a rapid and undesirable manner. this possibility is the downside risk of an additional rate hike in the current environment. if one is sufficiently worried about this downside risk, then prudent risk management would suggest skipping a hike at the june meeting but leaning toward hiking in july based on the incoming inflation data. there is a little over a month between the june and july fomc meetings, and during that time we will learn more about how credit conditions are evolving. over four months will have passed between the silicon valley bank failure and the july meeting. by then we will have a much clearer idea about credit conditions. if banking conditions do not appear to have tightened excessively, then hiking in july could well be the appropriate policy. lastly, one might want to pause hikes at the june meeting, meaning that the target range is at its terminal rate, if the current stance of policy is thought to be enough to bring inflation down over time. between policy lags and possible tightening credit conditions, the current stance of monetary policy may be seen, at that point, as sufficiently restrictive to move us toward the dual mandate

elizabeth a duke : central bank cooperation in times of crisis speech by ms elizabeth a duke, member of the board of governors of the federal reserve system, at the center for latin american monetary studies 60th anniversary conference, mexico city, 20 july 2012. * * * it is a pleasure to participate in this commemorative conference on the occasion of the 60th anniversary of the center for latin american monetary studies ( cemla ). since its establishment in 1952, cemla has achieved a great deal on both the policy and research fronts to promote our understanding of monetary and banking issues in latin america and the caribbean. the topic i have been asked to speak about today, “ central bank cooperation in times of crisis, ” is very important. as we know, central banks typically work individually to achieve objectives for their domestic economies. in the case of the federal reserve, monetary policy is conducted to achieve our statutory objectives of maximum employment and price stability. and, of course, fostering a stable financial system is key to attaining these goals. but the experience of the past few years has illustrated – first with the global financial crisis and more recently with the strains in europe – that cooperation and coordination among central banks around the world may be necessary at critical junctures to achieve these domestic objectives. in my remarks today, i will describe the evolution of the federal reserve ’ s policies during and after the global recession and show how many of those policies were undertaken in coordination with, or in parallel to, similar actions by other central banks. i will start with the monetary policy responses of the federal reserve and other central banks during the financial crisis. i will then discuss the efforts that the federal reserve has made, often in cooperation with other central banks and international partners, to help enhance financial stability. finally, i will focus on the challenges facing latin american central banks, whose economies and financial systems were affected by the crisis itself, and by the responses of other central banks to the crisis. 1 0f federal reserve policies and coordination with other central banks although the financial crisis that emerged in the summer of 2007 initially manifested itself as a sharp deterioration in u. s. mortgage markets, the roots of the problem ran deeper. indeed, the consequences of a credit boom combined with excessive leverage, mispricing of risk, and deficiencies in risk management became increasingly apparent. and given the international extent of these vulnerabilities and interconnections, the crisis quickly became global. central banks around the world responded forcefully. from the outset