Stock Market Rally Draws Scrutiny From Federal Reserve Chair Powell
WASHINGTON – Federal Reserve Chair Jerome Powell acknowledged rising asset valuations, including a surge in stock prices following last week’s interest rate cut, but downplayed concerns about heightened financial stability risks. The comments came as major indices continue to reach record highs after the Federal Open Market Committee lowered interest rates by 25 basis points on Wednesday.
Powell explained the Fed closely monitors overall financial conditions and assesses whether its policies are having the intended effect. “We really monitor the general financial conditions and examine whether our policy influences the financial conditions in the way we want to achieve,” he stated. He conceded that “many standards, for example, stock prices have been fairly highly valued.”
The market’s reaction to the Fed’s actions has been meaningful. shares and other assets experienced a strong rally leading up to the monetary policy meeting, and have continued their upward trajectory since the rate reduction.
“Markets pay attention to us, follow us, and make an estimate of where they think interest rates are. And they priced everything accordingly,” Powell said, referencing market anticipation surrounding mortgage rates.
Despite the elevated stock values, Powell asserted, “This is not a period of increased financial stability risks.”
source of cover image: 2019 Getty Images
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