Powell Highlights High Equity Valuations
(MENAFN) US Federal Reserve Chair Jerome Powell stated Tuesday that equity prices, a category typically comprising stocks and other risky assets, are "fairly highly valued."
During a speech in the northeastern state of Rhode Island, the Fed chair was asked whether he and his colleagues have a greater tolerance for elevated valuations and how much emphasis they place on market pricing.
“We do look at overall financial conditions, and we ask ourselves whether our policies are affecting financial conditions in a way that is what we’re trying to achieve,” Powell explained.
“But you’re right, by many measures, for example, equity prices are fairly highly valued.”
Following the central bank’s decision to cut the policy rate last week for the first time this year, coupled with growing expectations for additional reductions, stock markets rallied to reach record-high levels.
“Markets listen to us and follow and they make an estimation of where they think rates are going. And so they’ll price things in,” Powell added.
The Fed chair noted that this is "not a time of elevated financial stability risks," although he acknowledged the high valuations in equities.
After Powell’s comments, the New York Stock Exchange experienced a decline, despite opening the day in positive territory.
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