Press conference exchange between STEVE LIESMAN and Fed Chair Jerome Powell:

user: Thank you, Mr. Chairman. I wonder if I could follow up on Jeanna’s question here. I understand that you do address issues of, of valuations through macroprudential policies in the first instance, but there’s a range of assets. And I know you do watch a range of assets. But from Bitcoin to corporate bonds to the stock market in general to some of these more specific meteoric rises in stocks like GameStop, how do you address the concern that super easy monetary policy—asset purchases and zero interest rates—are potentially fueling a bubble that could cause economic fallout should it burst?

assistant: Let me—let me provide a little context. The shock that the—from the pandemic was unprecedented both in its nature and in its size and in the amount of unemployment that it created and in the shock to economic activity. There’s nothing close to it in our modern economic history. So our response was really to that. And we—we’ve done what we could, first, to restore market function and to provide a bit of relief, then to support the recovery. And, hopefully, we’ll be able to do the third thing, which is to avoid longer-run damage to the—to the economy. Our role assigned by Congress is maximum employment and stable prices and also look after financial stability. So, in a world where, almost a year later, we’re, we’re still 9 million jobs, at least—that’s one way of counting it; it can actually be counted much higher than that— short of maximum employment and people are out of the labor force who were in the labor force—the real unemployment rate is close to 10 percent if you include people that’ve left the labor force—it’s very much appropriate that monetary policy be highly accommodative to support maximum employment and price stability, which is getting inflation back to 2 percent and averaging 2 percent over time. So, on, on matters of financial stability, we have a framework. We don’t look at one thing or two things. We look at—and we made that framework public after the financial crisis so that it could be criticized and understood and we could be held accountable. And, you know, the things that we look at are—we do look at asset prices. We also look at leverage in the banking system. We look at leverage in the non—the nonbanking system, which is to say, corporates and households. And we look at also funding risk. And if you look at it across that range of, of, of readings, they’re each different, but we monitor them carefully. And I would say that financial stability vulnerabilities overall are moderate. Our overall goal is to assure that the financial system itself is resilient to, to shocks of all kinds, that it’s strong and resilient. And that includes not just the banks, but money market funds and, and all different kinds of nonbank financial structures as well. So when we get to the nonfinancial sector, we don’t—we don’t have jurisdiction over that. But—so I would just say that our—that there are many things that go in, as you know, to, to setting asset prices. So if you look at what’s really been driving asset prices, really, in the last couple of months, it isn’t monetary policy. It’s been expectations about vaccines. And it’s also financial—sorry, fiscal policy. Those are—those are the news items that have been driving, driving asset purchases—sorry, asset values in, in recent months. So I, I know that monetary policy does play a role there, but that’s how we look at it. And I think, you know, I think that the connection between low interest rates and, and asset values is probably something that’s not as tight as people think, because a lot of—a lot of different factors are driving asset prices at any given time.

user: Can I follow up, Michelle, if you don’t mind? Mr. Chairman, do you rule out or see as one of your tools in the toolkit the idea of adjusting monetary policy to address asset values?

assistant: So, you know, that’s—as you know, that’s one of the very difficult questions in all of monetary policy. And we don’t rule it out as a theoretical matter, but we, we clearly look to macroprudential tools, regulatory tools, supervisory tools, other kinds of tools rather than monetary policy in, in addressing financial stability issues. It’s not—you know, the, the monetary policy we know strengthens economic activity and job creation through fairly well- understood channels. And a strong economy is actually a great supporter of financial stability. That will mean strong, you know, well-capitalized institutions, and, and households will be— will be working. And, and so we know that. We don’t actually understand the tradeoff between—the sense of it is, would you—if you raise interest rates and thereby tighten financial conditions and reduce economic activity now in order to address asset bubbles and things like that, what—will that even help? Will it—will it actually cause more damage, or will it help? So I think that’s unresolved. And I, I think it’s, it’s something we, we look at as not, not theoretically ruled out but not something we, we—we’ve ever done and not something we would plan to do. We would rely on macroprudential and other tools to deal with financial stability issues.