WASHINGTON (REUTERS) - Monetary policy faces major limitations as a tool to address risks to financial stability, and regulation needs to play the primary role, Federal Reserve Chair Janet Yellen said on Wednesday.
Ms Yellen said an increased focus on financial stability in monetary policy deliberations is appropriate, but that policy should only shift to combat risks to stability in rare circumstances.
"The potential cost ... is likely to be too great to give financial stability risks a central role in monetary policy discussions," Ms Yellen said in remarks prepared for delivery at an event sponsored by the International Monetary Fund.
Ms Yellen also downplayed concerns about increased risk-taking in the United States. "I do not presently see a need for monetary policy to deviate from a primary focus on attaining price stability and maximum employment," she said.