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

user: Brian Cheung with—hi, Chairman Powell. Brian Cheung with Yahoo Finance. I wanted to ask about financial stability, which is a part of the Fed’s reaction function here. It seems like to people on the outside who might not follow finance daily, they’re paying attention to things like GameStop, now Dogecoin. And it seems like there’s interesting reach for yield in this market—to some extent, also Archegos. So does the Fed see a relationship between low rates and easy policy to those things, and is there a financial stability concern from the Fed’s perspective at this time?

assistant: Right. So we look at—financial stability for us is really—we have a broad framework, so we don’t just jump from one thing to another. I know many people just look at asset prices, and they look at some of the things that are going on in the—in the equity markets, which, which I think do reflect froth in the equity markets. But really, it—really, we try to stick to a framework for financial stability so we can—so we can talk about it the same way each time and so we can be held accountable for it. So one of the areas is asset prices, and I would say some of the asset prices are high. You are seeing, seeing things in the capital markets that, that are—that are a bit frothy. That’s a fact. I won’t say it has nothing to do with monetary policy, but it also—it has a tremendous amount to do with vaccination and reopening of the economy. That’s really what has been moving markets a lot in the last few months is this turn away from what was a pretty dark winter to now a fast—a much faster vaccination process and a faster reopening. So that’s, that’s part of what’s going on. The other—the other things, though—you know, leverage in the financial system, is it— is, is not a problem. That’s a—that’s a—that was one of the four pillars. Asset prices was one. Leverage in the financial system is, is not an issue; we have very well capitalized large banks. We have funding risks for, for our largest financial institutions that are also very low. We do have some funding risk issues around money market funds, but I would say they’re not systemic right now. And, and the household sector is actually in pretty good shape. It was in—it was in a very good shape as a relative matter before the financial crisis—sorry, the pandemic crisis hit. There were real concerns, of course, with high levels of unemployment and loss of wages and all of that, that the—that the household sector would, would, would weaken dramatically. That hasn’t happened. So, with the fiscal transfers, money that’s on household balance sheets, they’re in good shape. You see relatively low defaults and that thing. So the overall financial stability picture is mixed, but, on balance, it’s—you know, it’s manageable, I would say. And it’s—by the way, I think it’s appropriate and important for financial conditions to remain accommodative to support economic activity. Again, 8½ million people who had jobs in February don’t have them now, and, you know, there’s a long way to go until we reach our goal. So that’s what I would say.

user: As a follow-up, you mentioned money market pressures. The Fed didn’t make changes to interest on reserves or excess reserves. What was the logic behind that? It seems like SOFR has been drifting closer to zero. So just hoping for clarification on that.

assistant: Right. So the federal funds rate has been well within target and—at target range, and money market funds—money market conditions are, are fine. We have the ability to use our administrative tools to make sure remains the case. We do expect further downward pressure on, on rates through asset purchases and also the runoff in the—in the Treasury General Account. But, at this point, we didn’t see a need for—to, to deploy our tools to, to support rates. And, of course, we will do so if, if the need does arise.