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U.S. Federal Reserve warns over risk of "significant declines" in asset prices as valuations climb Updated: 2021-05-07 13:50:47 KST


The U.S. Federal Reserve has voiced concern over rising asset prices in the stock market, saying that it poses a high threat to the financial system.
In its latest report on Thursday, the central bank warned that prices of stocks and assets are rising to levels that could leave investors with big losses.
Prices of stocks and risky assets have generally increased since November, in some cases to record highs, on the back of an improved outlook for the post-COVID-19 economy.
Investors have snapped up equities, cryptocurrencies, and other financial assets and valuations of those have been high.
The Fed says this is creating vulnerabilities in the financial system, and that "asset prices may be vulnerable to significant declines should risk appetite fall."
In a statement accompanying the report, Fed Governor Lael Brainard said the situation needs to be watched closely and noted the importance of making sure the financial system is resilient.
With valuations and risk appetite at elevated levels, she called for strong safeguards and tools to address risks to financial stability.
Thursday's report also noted that risks associated with the course of the pandemic remain relatively high.
A worsening of the global pandemic could stress the financial system in emerging markets
and some European countries and these risks together could pose an additional threat to the U.S. financial system.
For now, however, the central bank evaluated the current state of the system to be sound, with both business and household balance sheets in good shape.
Min Suk-hyen, Arirang News.
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