Fed Officials Assure America There Is No Bubble In Sight
In New York this week, Eric Rosengren, President of the
Federal Reserve Bank of Boston, assured several audience members
surrounding him after a speech on financial market regulation that he
saw “no bubbles of any kind, even in real estate,” where he reckoned
residential home prices were still selling at a discount to the peak
values in 2006. He added that residential homes in Boston and New York
were selling at a 10% to 20% discount from the records set before the
great recession while prices in Miami, Phoenix and California were at
even further below the peak. Rosengren is a member of the Fed’s Open
Market Committee that rules over the application of monetary policy and
especially the level of interest rates. He made it clear he would
support the Fed’s record low interest rates until there is more
“traction” in the economic recovery nationally.
This comforting
opinion has also been articulated in recent weeks by both Ben Bernanke,
the Federal Reserve Board Chairman, other regional central bank
presidents and even a leading policy maker at the Bank of England.
on March 20, 2013, for instance, Chairman Bernanke exclaimed clearly
that “in the stock market, you know, we don’t see at this point anything
that’s out of line with historical patterns. In particular… while the
Dow may be hitting a high, it’s in nominal terms, not in real terms. And
if you adjust for inflation and for the growth of the economy… we’re
still some distance from the high.” He also was of the opinion that “the
relationship between stock prices and earnings is not particularly
unusual at this point.”
As well, Chicago Federal Reserve President
Charles Evans said recently; ” We’ve looked at a lot of things and
there’s nothing in the horizon that causes me great angst. Minneapolis
Federal Reserve President Narayana added that bubbles are “ something we
have to keep monitoring”, but ” I don’t see” any risk at present.
During a recent panel discussion at the Boston Fed a Bank of England
official, David Miles, weighed in with his level of comfort by saying ” I
don’t think we’re in that kind of territory that obviously makes these
asset prices unsustainable and at a bubble level.”
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