Fed Chair Powell says asset valuations 'frothy' amid Dogecoin, Gamestop frenzy
Yahoo Finance’s Brian Cheung breaks down his line of questioning to Jerome Powell, chairman of the Federal Reserve, during a press conference on Wednesday.
Video Transcript
MYLES UDLAND: GDP data out earlier this morning, slightly missing expectations, a 6.4% increase in gross domestic product at an annualized rate in the first quarter, a little bit low of where the Street had been looking. This coming after we heard from Fed Chair Jay Powell yesterday afternoon. Powell saying the central bank is still a long way from raising interest rates. Also talking through a number of other issues facing the economy right now.
And Yahoo Finance Fed correspondent Brian Cheung joins us to discuss a little bit of what we heard yesterday from Powell, Brian. And there's the taper conversation. He was asked the question 50 different ways. But you got him to say something that was actually interesting and actually did move the market a little.
BRIAN CHEUNG: Well, my logic, Myles, was that it was an uneventful meeting. So the Fed held interest rates steady at near zero. And it didn't announce any changes to that $120 billion a month pace of asset purchases. So I figured I would ask a question about financial stability. And people who aren't even watching financial markets daily had been looking at things like the GameStop story and now Dogecoin. So I phrased it to him as, when you look at these types of stories, are there any sort of financial stability risks that the Federal Reserve might see down the pipe? Becuase if that is the case, maybe there's an argument to hike sooner than later. Here was the Fed chairman's response.
JAY POWELL: Some of the asset prices are high. You are seeing things in the capital markets 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 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 part of what's going on.
The other things, though, leverage in the financial system is not a problem. That was one of the four pillars. Asset prices was one. Leverage in the financial system is not an issue.
BRIAN CHEUNG: So a few things to unpack there. First of all, he said that asset valuations are frothy. That's as we've seen overall market levels break the repeated new record highs, despite the fact that there are still over 8 million people left on the sidelines. And then, secondly, the Fed chairman acknowledging that monetary policy and low rates could have an effect, although he was saying that most of the run-up in the broad equities market is because of the optimism over the economic reopening.
And guys, just two points I want to make. First of all, my question was not directly asking him about what he thought about Dogecoin. There are some crypto people in my mentions that are saying that. And this also was not because Myles Udland had tweeted a few minutes before the press conference urging someone to ask the Fed chairman about Dogecoin. I just needed to clear the air on those two things.
MYLES UDLAND: Look, I'm glad, Brian, that you're using this platform to make clear to our viewers there is not collaboration here at Yahoo Finance. Everyone operates as an individual fiefdom. We would not want to communicate with one another.
BRIAN CHEUNG: Especially not with that guy.
MYLES UDLAND: That's right, and-- see, you're such a pro. You knew which way to point. I think another thing as well is in June, OK, we're going to get the new economic projections. Also likely in July's meeting, there's pretty much nothing going on-- I think another opportunity to maybe ask a more pointed question about whether he likes the Doge network. Is Powell more of an Ethereum guy? Is he excited maybe about Bitcoin cash? I mean, how is he allocating within crypto? I think it's a fair question.
BRIAN CHEUNG: But of course, who knows what the big news story is going to be in July, right? Maybe at that point, Elon Musk-- I don't know-- owns the whole market cap of some other meme stock or meme cryptocurrency at that point. But yeah, I mean, rest assured, I'll be sure to ask that question, Myles, just for you.
MYLES UDLAND: There we go. All right, Brian Cheung, on it for us, as always, when it comes to the Federal Reserve.
