zerohedge.com / by Tyler Durden / Oct 20, 2016 9:35 AM
One month ago, during the Fed’s September press release, she was asked if she is “worried about bubbles in the economy because of our prolonged low interest rates?”
This was her response:
Yes. Of course we are worried that bubbles will form in the economy and we routinely monitor asset valuations, while nobody can know for sure what type of valuation represents a bubble, that’s only something one can tell in hindsight, we are monitoring these measures of valuation and commercial real estate valuations are high. Rents have moved up over time, but still valuations are high, relative to rents. And so it is something we’ve discussed. We called this out in our monetary report and in other presentations and we are, in our supervision with banks, and I indicated, we have issued supervisory guidance to make sure underwriting is strong on these loans and this is something that we’ve looked at in stress tests, the larger banks to see what would happen to their capital positions and to make sure that they hold sufficient capital. And of course, I think the soundness and state of the banking system has improved substantially, but of course we are focused on such things.
Or, a shorter version, No, she isn.’t.
Fast forward one month when moments ago Mario Draghi was likewise asked if he was concerned about asset bubbles. His response: “So far we have not seen an evidence of bubbles” which he defined as rising asset prices propelled by rising leverage.
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