Federal Reserve Chair Janet Yellen said Wednesday that “Equity market valuations at this point generally are quite high,” and warned that “there are potential dangers there.”
“We’ve also seen the compression of spreads on high-yield debt, which certainly looks like a reach for yield type of behavior,” Yellen said.
Yellen made the comments at a joint appearance with International Monetary Fund Managing Director Christine Lagarde.
While excessive risk taking may be seen in stocks, risks to financial market stability are moderate at the moment, she added.
“A well-functioning financial sector promotes job creation, innovation and inclusive economic growth. But when the incentives facing financial firms are distorted, these firms may act in ways that can harm society,” Yellen said. “Appropriate regulation, coupled with vigilant supervision, is essential to address these issues.”
Traders hoping for any specific commentary on monetary policy were disappointed, as Yellen gave no indication of whether the Fed will hike rates this summer.
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