The Federal Reserve doesn’t see risks to market stability, even as concern about bubbles grows – By Patti Domm (CNBC) / January 28 2021
- Fed Chairman Jerome Powell was asked his views on the potential for asset bubbles in the stock and housing markets due to easy Fed policy at the Fed’s post meeting briefing Wednesday.
- The Fed chairman indicated the Fed’s monitoring of asset prices and other financial measures does not indicate any issues with financial stability.
- But market pros see the potential for bubbles and don’t expect the Fed to tighten policy any time soon
Some market pros see the frenzied short squeezes in Gamestop and other stocks as signs of a bubble brewing, but the Federal Reserve doesn’t seem to and for that reason investors expect asset prices could continue to rise.
Powell explained that the Fed has had to use its extraordinary policy to help the economy with still more than 9 million people out of work.
“It’s very much appropriate that monetary policy be accommodative,” he said. Powell also said with regard to financial stability, the Fed considers asset prices, leverage in the banking system and non banking system, as well as funding risk.