Fed's Dudley: Central bank has 'fallen short'

The Federal Reserve has "fallen short of meeting its employment and inflation objectives," Federal Reserve Bank of New York President William C. Dudley said Monday.

The central bank failed to meet its mandate for stable prices and maximum employment after the U.S. economic rebound fell short of projections, Dudley said in a speech in Basel, Switzerland.

Even after the Fed's "aggressive shift" toward greater accommodation in 2008 and 2009 and easing that helped spur growth and support housing, the economic recovery has been "consistently weaker than forecast," he said, according to the text of a speech posted on the New York Fed's website. "This suggests that with the benefit of hindsight, U.S. monetary policy, though aggressive by historic standards, was not sufficiently accommodative relative to the state of the economy."

Dudley also said financial stability is a "necessary condition" for monetary policy to effectively achieve its goals.

"The biggest lesson of the financial crisis has been that monetary policy cannot work properly when there is financial instability," Dudley said at the Bank for International Settlements 2013 general meeting.

"The central bank may move to a much more accommodative monetary policy stance, but this may not lead to much improvement in financial conditions," he said.

The Federal Open Market Committee last week voted to press on with $85 billion in monthly bond purchases.