James Bullard, president of the St. Louis Federal Reserve, said on Tuesday he sees no asset price bubble and doubts the central bank should tighten policy any time soon.
With prices soaring in the stock market and in alternative assets such as bitcoin, Fed officials have repeatedly faced the question of whether low interest rates and trillions in bond purchases have helped create dangerously high valuations.
But Bullard told CNBC there are no obvious signs of excess, although he admitted that stocks are “generally highly valued.”
“The most important thing in stocks is really these tech companies and how highly you are going to rate these guys,” he said of “Squawk Box.” “They have great technology, they have great revenues, business models [where] the sky is the limit. So, where investors want to value that really drives a big chunk of the market. “
“I’m not sure you want to call that part a bubble,” he added. “That’s just normal investing, trying to understand what those companies are really worth.”
In response to the Covid-19 pandemic, the Fed lowered its short-term benchmark interest rate to nearly zero and buys at least $ 120 billion worth of bonds every month in an effort to keep liquidity in the economy.
As growth appears to be back on solid ground and inflation concerns are mounting, markets have been concerned about when the Fed would withdraw its highly accommodative measures.
But Bullard said that day is not coming, even though the Fed is “monitoring very closely to see if this gets out of hand.”
He noted that signs point to a strong economic recovery this year.
“Let’s be clear. Wall Street thinks the US economy will grow faster than China this year,” with a “buzzing US economy fueled by fiscal stimulus and monetary policy.”
But when asked if he thinks the Fed should slow down 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 I just actually plays out. “
Bullard added that he is not concerned about the rise in bitcoin prices – past $ 50,000 Tuesday morning – and said it is unlikely to affect Fed policy.