Tags: Powell | financial | markets | rates

Fed's Powell: 'I Don't See Bubble Territory' for Financial Markets

By    |   Monday, 17 November 2014 11:21 AM

Many experts have expressed concern that the Federal Reserve's massive easing program has caused bubbles in financial markets.

But Fed Governor Jerome Powell doesn't see it that way.

"I would say things are fully priced out there. I don't see bubble territory, and we don't see leverage building up," he told CNBC.

"It's something we watch carefully, but I can't make a case that we're at risk of significant financial instability."

The S&P 500 index and Dow Jones Industrial Average hit record highs once again last week. And the 10-year government bond yield has slid to 2.32 percent from 3.04 percent at the end of last year.

Investors are keenly focused on when the central bank will begin raising interest rates, with mid-2015 the consensus forecast of economists. "The time to raise rates is coming," Powell stated. But, "it's not here yet."

"It's totally dependent on the progress of the economy toward full employment and getting inflation back up to 2 percent. On the economy, I'd say I'm cautiously optimistic," he noted.

"We've had very good job creation this year. Inflation is a little bit below target, but I would expect that it will go back up to our 2 percent target as slack comes out of the company. That means if we stay on the current path it would make sent to raise rates sometimes during 2015 perhaps in the middle of 2015."

He said economic weakness overseas might pose a threat to the U.S. economy. Japan reported Monday that its economy shrank 1.6 percent annualized in the third quarter after a 7.3 percent contraction in the second quarter.

"Europe is very weak. China has weakened. Japan is weak. There's weakness in Latin America," Powell explained. "We haven't felt that in the United States yet, [but] the risk is that we will feel it through the trade channel or other channels."

Powell isn't the only one worried about the global economy. A recent report from the International Center for Monetary and Banking Studies warns of a "poisonous combination of high and rising global debt and slowing nominal GDP, driven by slowing real growth and falling inflation."

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Finance
Many experts have expressed concern that the Federal Reserve's massive easing program has caused bubbles in financial markets.
Powell, financial, markets, rates
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2014-21-17
Monday, 17 November 2014 11:21 AM
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