Fed needs to detect asset bubbles when they’re forming | Waccabuc Real Estate

Janet Yellen, vice chair of the Federal Reserve Board of Governors, appeared every bit the monetary policy dove that investors expected during her first big hearing in front of the Senate Banking Committee as Fed Chair nominee.

Yellen reiterated her approach to Fed policy, showing a commitment to using the low federal funds rate and the ongoing $85 billion in monthly asset purchases to drive an economic recovery. The fed views economic success against the backdrop of two key indicators — unemployment and price stability.

Yellen eschewed suggestions from Senators that a souped up market – driven by recent Fed asset purchases and low interest rates – has caused a new bubble to inflate in areas such as housing.

“The Fed needs to detect asset bubbles when they are forming,” Yellen said. “By and large, I would say I don’t see evidence at this point of asset price misalignments at a level that would threaten financial stability.”

Yellen went on to ensure Senators that the Fed has a variety of tools at its disposal to pull back aggressive monetary policies should price misalignments or other issues surface.

The nominee then pointed to the housing market as a primary beneficiary of Fed policies.

 

 

 

http://www.housingwire.com/articles/27966-yellen-fed-needs-to-detect-asset-bubbles-when-theyre-forming