James Bullard, president of the US Federal Reserve in St. Louis, said Tuesday he saw no bubble in asset prices and doubted the central bank would have to start tightening policy anytime soon.
Given the surge in stock markets and alternative assets like Bitcoin, Fed officials have repeatedly been asked whether low interest rates and trillions of dollars in bond purchases have contributed to dangerously high valuations.
But Bullard told CNBC that there are no clear signs of excess, despite admitting that stocks are “highly valued overall”.
“The biggest thing about stocks really is these technology companies, and how much do you value these people,” he said on Squawk Box. “They have great technology, they have great revenue, business models [where] the sky is the limit. Where investors want to evaluate these is really what drives a large part of the market. “
“I’m not sure if you want to call this part a bubble,” he added. “That’s normal when you try to get an idea of what these companies are really worth.”
In its response to the Covid-19 pandemic, the Fed has cut its short-term policy rate to near zero and is buying at least $ 120 billion worth of bonds every month to help keep liquidity flowing into the economy.
With growth appearing to be solid again and increasing concerns about inflation, markets have worried about when the Fed might pull back on its highly accommodative measures.
But Bullard said that day is not imminent, even though the Fed is “monitoring very closely whether this is getting out of hand.”
He noted that the signs point to 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 stimulus and monetary policy.”
When asked if he thought the Fed should slow the pace of asset purchases, Bullard said, “Not really. I think we’re in good shape for today. Why don’t we just wait and see if the scenario goes that I just described actually plays out. “
Bullard added that he wasn’t worried about the rise in Bitcoin prices – after $ 50,000 on Tuesday morning – and said it was unlikely to have any impact on Fed policy.