NEW YORK, Nov. 28 (UPI) -- The U.S. Federal Reserve's monetary policies must be "nimble" to tackle economic risks, a Fed vice chairman said Wednesday.
"The increased (financial-market) turbulence of recent weeks partly reversed some of the improvement in market functioning over the late part of September and in October," Donald Kohn said in remarks to the Council on Foreign Relations in New York.
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," Kohn said.
The Fed board member said financial-market uncertainties required "flexible and pragmatic policymaking -- 'nimble' is the adjective I used a few weeks ago."
Some investors took Kohn's comments as a sign the Fed was open to lowering interest rates further when it meets Dec. 11. The Dow Jones industrial average closed up more than 330 points.
Apart from the financial sector, businesses remain in "very good" financial condition and households not involved with adjustable-rate mortgages are generally meeting their obligations, Kohn said.
But this could change if lenders "adopt a more defensive posture in granting credit, not only for house purchases, but for other uses a well," he said.
Kohn added that investors who "exercised poor judgment" and lost money should face the costs of their decisions but "we should not hold the economy hostage to teach a small segment of the population a lesson."
