Powell Acknowledges High Asset Prices, Maintains No Major Stability Concerns
Providence, Rhode Island – Federal Reserve Chair Jerome Powell stated Tuesday that asset prices, including stocks, are currently at elevated levels. Speaking in Providence, Rhode Island, Powell addressed questions regarding the Federal Reserve’s consideration of market valuations and whether the central bank has increased its tolerance for higher prices.
Powell explained that the Fed monitors overall financial conditions too assess the impact of its policies. He acknowledged that equity prices are “fairly highly valued” by many metrics. This observation comes after a period of strong market gains leading up to and following last week’s Federal Open Market Committee (FOMC) meeting, where the benchmark overnight borrowing rate was cut by a quarter percentage point. The market anticipated this rate cut, and stock prices continued to rise to record highs after the decision.
Powell noted that markets react to Fed interaction and attempt to predict future interest rate movements, factoring those expectations into pricing.
Despite recognizing the high valuations, Powell indicated that the current habitat dose not present “elevated financial stability risks.”
Following Powell’s remarks, stock markets experienced a downturn, wiht major averages declining.
