St. Louis Federal Reserve Chairman James Bullard said Tuesday he does not see a bubble in asset prices and doubts the central bank should start tightening policy soon.
With rising prices in the stock market and in alternative assets such as bitcoin, Fed officials have repeatedly faced questions about whether low rates and trillions in bond purchases have helped create valuations. dangerously high.
But Bullard told CNBC there are no clear signs of excesses, though he admitted the shares are “highly valued overall.”
“The most important thing about stocks is really these tech companies and how much you value these guys,” he told Squawk Box. “They have great technology, they have great revenue, business models [where] the sky is the limit. So where investors want to value them is really a big chunk of the market. “
“I’m not sure you want to call this part a bubble,” he added. “This is just normal investing, trying to get what’s really worth it for these companies.”
In its response to the Covid-19 pandemic, the Fed has reduced its benchmark short-term lending rate to near zero and buys at least $ 120 billion in bonds each month in an effort to keep liquidity flowing. to the economy.
With seemingly new growth and concerns about inflation, markets have been worried when the Fed may begin to withdraw from its highly accommodative stocks.
But Bullard said that day is not imminent even though the Fed is “watching very closely to see if this gets out of control.”
He noted that the signs point to a strong economic recovery this year.
“Let’s be clear. Wall Street thinks the U.S. economy could grow faster than China this year” with a “roaring U.S. economy fueled by fiscal stimulus and monetary policy.”
But when asked if he thinks the Fed should start slowing down its asset purchases, Bullard said, “Not really. I think we’re in good shape today. Why don’t we wait to see if l ‘scenario I just described actually plays out’.
Bullard added that he is not worried about rising bitcoin prices (past $ 50,000 on Tuesday morning) and said it is unlikely to affect Fed policy.