Press conference exchange between BRIAN CHEUNG and Fed Chair Jerome Powell:

user: Hi, Chairman Powell. Brian Cheung, Yahoo Finance. Within the context of just the broad effort to normalize rates, would you describe what you want to do as a gradual hiking? And then, secondly, within the context of hiking cycles, it’s often the talking point for financial stability and wanting to make sure that asset bubbles don’t emerge. Is that something that has also factored into the conversation as you start to think about hiking rates? Thanks.

assistant: I would describe what we’re doing along these lines. This is going to be a year in which we move steadily away from the very highly accommodative monetary policy that we put in place to deal with the—with the economic effects of the pandemic. And that’s going to involve a number of things. It’s going to involve and does involve finishing asset purchases. It’s going to involve lifting off. And it’s going to involve additional rate increases as appropriate. And we, we have—we’re going to write down in March our next assessment of what that might be. It’s going to continue to evolve as the data evolve. We need to be quite adaptable, I think, in our understanding of this. The last thing we’re going to do is, we’re going to have a couple more meetings, I think, to talk about allowing the balance sheet to begin to run off and to do so in a predictable manner. And that’s, that’s something that we will also be doing as appropriate. And I wouldn’t—I don’t think it’s possible to say exactly how this is going to go. And we’re, we’re going to need to be, as I’ve mentioned, nimble about this. And the economy is quite different this time. I’ve said this several times now. The economy is quite different. It’s stronger. Inflation is higher. The labor market is much, much stronger than it was. And growth is above trend, even this year, let alone last year. So all of those things are going to go into our thinking as we make—as we make monetary policy. And you asked about financial stability concerns. In connection with our policy–was that your question?

user: Yes. Within the context of other hiking cycles, it seems like a set of worries about asset bubbles emerging as a result of easy rates has been part of that. I didn’t know if that was part of the discussion today.

assistant: I would just say this. We, we, of course, have a financial stability framework. And what it shows is a number of, of positive aspects of financial stability. But you mentioned, really, the behavior of asset prices is one of the four. So asset prices are somewhat elevated, and they reflect a high risk appetite and that thing. I don’t really think asset prices themselves represent a significant threat to financial stability, and that’s because households are in good shape financially than they have been. Businesses are in good shape financially. Defaults on business loans are low and that thing. The banks are highly capitalized with high liquidity and quite resilient and strong. There are some concerns in the—in the nonbank financial sector around—still around money market funds, although the SEC is making—has made some very positive proposals there. And we also saw some things in the Treasury market during the acute phase of the crisis, which, which we’re looking at ways to address. But, overall, the financial stability vulnerabilities are manageable—are manageable, I would say.