Federal Reserve Board chairman Ben Bernanke speaks before the Senate Banking, Housing and Urban Affairs Committee on Sept. 30, 2010 in Washington.Alex Wong
You know the business of central banking is changing when central banks start creating new divisions to organize study and analysis.
Federal Reserve chairman Ben Bernanke mentioned during testimony at the Senate Banking Committee Thursday that he has created a new unit within the Fed devoted to financial stability. This unit's work will become part of the mix of data, forecasts and analysis that the Federal Open Market Committee takes into account when it makes policy decisions.
The Fed's new financial stability office is further evidence that post-crisis monetary policy is about more than economic growth and price stability. Central bankers recognize now that financial markets have a dramatic bearing on the "real" economy. So policy makers feel compelled to take it upon themselves to keep credit markets functioning normally. Add bond spreads, household and corporate debt levels, and any number of other financial indicators to the list of measures you watch to guess where borrowing costs are headed.