The Fed continues to be rather sanguine about high asset
prices:
Janet Yellen is apparently betting on macroprudential
policies to save the day:
She states:
“I will argue that
monetary policy faces significant limitations as a tool to promote financial
stability: Its effects on financial vulnerabilities, such as excessive leverage
and maturity transformation, are not well understood and are less direct than a
regulatory or supervisory approach; in addition, efforts to promote financial
stability through adjustments in interest rates would increase the volatility
of inflation and employment. As a result, I believe a macroprudential approach
to supervision and regulation needs to play the primary role.”