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WASHINGTON (MNI) - The following is a response of Federal Reserve Chairman
Janet Yellen to a question from a reporter at her press conference following
Wednesday's Federal Open Market Committee meeting.
Every day it seems we look at the stock market, it goes up, triple digits,
in the Dow Jones. To what extent are there concerns at the Federal Reserve about
current market valuations, and do they now or should they, do you think if we
keep going on the trajectory, should that animate monetary policy.
Finally, as a sign of what has been going on with valuations, this
cryptocurrency called Bitcoin keeps going up every day. What is the policy of
the central bank of the United States of the introduction, use and incredible
rise of popularity of Bitcoin?
Okay, so let me start, Steve, with the stock market generally. I mean of
course the stock market has gone up a great deal this year. And we have in
recent months characterized the general level of asset valuations as elevated.
What that reflects is simply the assessment that looking at price earnings
ratios and comparable metrics for other assets, other than equities, we see
ratios that are on the high end of historical ranges. So that's worth pointing
But economists are not great at knowing what appropriate valuations are. We
don't have a terrific record. And the fact that those valuations are high
doesn't mean that they are necessarily overvalued. We are in a, I've mentioned
this in my opening statement, and we have talked about this, repeatedly likely a
low interest rate environment, lower than we have had in past decades. And if
that turns out to be the case, that is factor that supports higher valuations.
We are enjoying solid economic growth with low inflation. And the risks in the
global economy look more balanced than they have in many years.
So, I think what we need to and are trying to think through is, if there
were an adjustment in asset valuations, with the stock market, what impact would
that have on the economy, and would it provoke financial stability concerns? And
I think when we look at other indicators of financial stability risks, there is
nothing flashing red there or possibly even orange.
We have a much more resilient, stronger banking system. And we are not
seeing some worrisome build-up in leverage or credit growth at successive
levels. This is something that the FOMC pays attention to, but if you ask me is
this a significant factor shaping monetary policy, now, well, it's on the list
of risks. It's not a major factor.
Then you asked about Bitcoin. And there I would simply say that Bitcoin at
this time plays a very small role in the payment system. It is not a stable
source of store value and it doesn't constitute legal tender. It is a highly
speculative asset. And the fed doesn't really play any role, any regulatory role
with respect to Bitcoin, other than assuring that banking organizations that we
do supervise are attentive that they are appropriately managing any interactions
they have with participants in that market, and appropriately monitoring anti
money laundering Bank Secrecy Act responsibilities that they have.
--MNI Washington Bureau; +1 202-371-2121; email: email@example.com