Fed's Kohn on low-probability, high-impact events

"I judge our policy in these cases to have been successful -- though the record for the most recent episode is still being written," Kohn said in the remarks, which were released in Washington although the conference was closed to media.

"When central banks are not tightly focused on achieving a specific objective for an exchange rate, a monetary aggregate, or an inflation rate, policy-makers may be granted a degree of discretion and can take account of the entire distribution of potential economic outcomes and their effects on societal welfare," he said.

"Policy seems more frequently to be deviating a bit from a stance that is calculated only to maximize the odds of achieving a specific, numerical, economic goal," he said, adding that many nations have recognized the benefits of free exchange rates and less rigid inflation targeting.

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Remarks by Federal Reserve Governor Donald L. Kohn at the European Central Bank Conference on Monetary Policy and Imperfect Knowledge, Wurzburg, Germany, 15 October 2004.

Click here to read the speech "How should policymakers deal with low-probability, high-impact events?" on the Federal Reserve's web site