Federal Reserve Chairman St. Louis, James Bullard, said on Tuesday that he did not see a bubble in asset prices and doubted that the central bank should start tightening policy soon.
With rising stock prices and alternative assets such as bitcoin, Fed officials have been faced with repeated questions about whether low rates and trillions of bond purchases have contributed to the creation of dangerous valuations.
But Bullard told CNBC that there were no clear signs of excess, although he acknowledged that the shares were “highly valued overall.”
“The biggest thing in stock is really these tech companies and how much you’re going to value these guys,” he told Squawk Box. “They have excellent technology, they have high incomes, business models [where] the sky is the limit. So, where investors want to value them, they really lead a large part of the market. “
“I’m not really sure you want to call this part a bubble,” he added. “It’s just a normal investment, trying to put your head in what those companies really deserve.”
In its response to the Covid-19 pandemic, the Fed has cut its short-term benchmark lending rate to near zero and buys at least $ 120 billion in bonds each month in an effort to maintain liquidity flowing into the economy.
With a seemingly backward growth on a solid footing and growing concerns about inflation, markets were worried when the Fed could start withdrawing its extremely accommodative shares.
But Bullard said the day was not imminent, even though the Fed was “monitoring very closely to see if it got out of hand.”
He noted that the signs indicate a strong economic recovery this year.
“Let’s be clear. Wall Street believes the US economy could grow faster than China this year,” with a “roaring US economy fueled by fiscal and monetary policy incentives.”
Asked if he thinks the Fed should start slowing its asset purchases, Bullard said: “Not really. I think we’re in good shape today. Why don’t we wait and see if the scenario we just described actually plays out. “
Bullard added that he is not worried about the rise in bitcoin prices – past $ 50,000 on Tuesday morning – and said it is unlikely to have an impact on Fed policy.