Yellen says prices for stocks and commercial real estate high, but stops short of calling it a bubble
Outgoing Federal Reserve Chair Janet Yellen said US stocks and commercial real estate prices are elevated but stopped short of saying those markets are in a bubble.
“I don’t want to say too high, but I do want to say high,” Yellen said on CBS’s Sunday Morning in an interview recorded on Friday as she prepared to leave the central bank. “Price-earnings ratios are near the high end of their historical ranges.”
Commercial real estate prices are now “quite high relative to rents,” Yellen said. “It’s very hard to tell” whether that’s a bubble or just “too high. Now is that a bubble or is it too high? It’s very hard to tell.”
Yellen, 71, stepped down as Fed chief on Saturday after one term after President Donald Trump opted to replace her with Republican Jerome Powell, who’s been a Fed governor since 2012.
“I made it clear that I would be willing to serve, so yes, I do feel a sense of disappointment” about not being renominated, Yellen said, describing her work at the Fed as “the core of my existence.” Yellen said she is supportive of Powell, whom she termed “thoughtful, balanced, and dedicated to public service.”
The financial system is now much better capitalised and the banking system more resilient than during the global financial crisis a decade ago, Yellen said. “I think our overall judgment is that if there were to be an overall decline in asset valuations,” it wouldn’t damage the “core” of the financial system, she said.
Yellen’s final act at the Fed was to hit one of the largest US banks, Wells Fargo&Co, with an unusual ban on growth that follows the San Francisco-based lender’s pattern of consumer abuses and compliance lapses.
In the interview that aired Sunday, she warned that it would be a “grave mistake” to roll back the regulations put on banks and other financial institutions in the wake of the past crisis.