James Bullard, president of the St. Louis Federal Reserve said Tuesday it does not see a bubble in asset prices and doubts whether the central bank should start tightening policy soon.
As prices rise in the stock market and in alternative assets such as bitcoin, Fed officials have repeatedly questioned whether low rates and trillions in buying bonds have helped create dangerously high valuations.
But Bullard told CNBC that there were no clear signs of excess, although he admitted that stocks were generally “highly valued.”
“The biggest thing in stocks is really these tech companies and how much are you going to value these guys,” he said on ‘Squawk Box’. ‘They have excellent technology, they have a good income, business models [where] the sky is the limit. Where investors want to appreciate it is therefore a large part of the market. ‘
“I’m not really sure you want to call the part a bubble,” he added. “It’s just normal investment, and trying to get your head around what those companies are really worth.”
In response to the Covid-19 pandemic, the Fed borrowed its short-term default rate to near zero, buying at least $ 120 billion worth of bonds each month in an effort to boost liquidity in the economy.
As growth appears to be strong again and concerns about inflation are rising, markets are worried that the Fed may start to retreat from its very accommodative actions.
But Bullard said the day is not at hand, although the Fed is “monitoring very closely to see if it gets out of control.”
He noted that signs point to a strong economic rebound this year.
“Let’s be clear. Wall Street thinks the US economy can grow faster than China this year” with a “roaring US economy fueled by fiscal stimulus and monetary policy.”
But he was asked if he felt the Fed should start slowing down the pace of his asset purchases, and Bullard said: “Not really. I think we are well able for today. Why are we not just waiting to see if the scenario I just described “actually plays out.”
Bullard added that he was not worried about the rise in bitcoin prices – last Tuesday morning $ 50,000 – and said that it would probably not affect Fed policy.