Federal Reserve press conference, 2015-03-18 — Chair Janet Yellen

Question (Peter Barnes, Fox Business): Peter Barnes, Fox Business. Chair Yellen, I wanted to check in again with you on whether or not you see or have any concerns about bubbles out there in the economy, particularly the financial markets—debt and equity markets. And I wanted to refer to your most recent Monetary Policy Report to Congress last month, in which you said “overall equity valuations by some conventional measures are somewhat higher than their historical levels . . . valuation metrics in some sectors continued to appear stretched relative to historical norms.” In the same report last year, in July, the report specifically mentioned biotech and social media stocks as being “substantially”—let me see here—“substantially stretched.” Do you still feel that way and can you comment on bubbles and particularly these sectors?
Answer: Well, I don’t want to comment on those particular sectors. You know, as we said in the report, overall measures of equity valuations are on the high side but not outside of historical ranges. In some corporate debt markets, we do see evidence of unusually low spreads, and that’s what was referred to in the report. More broadly, we do try to assess potential threats to financial stability. And in addition to looking at asset valuations, we also look at measures of credit growth, of the extent of leverage being used in the economy and in the financial sector, and the extent of maturity transformation. And taking into account a broad range of metrics that bear on financial stability, our overall assessment at this point is that threats are moderate.