Fed Officials Flag Financial Stability Risks Amid Soaring Asset Prices
Federal Reserve officials have shifted focus to financial market stability, raising concerns about potential sudden declines in asset prices. The debate over whether to cut interest rates at December's meeting now includes these risks as a key consideration.
Lisa Cook, a Federal Reserve Governor, avoided clear guidance on near-term rate policy during a Georgetown University speech but highlighted systemic vulnerabilities. Private credit expansion, hedge fund Treasury trading, and generative AI's role in markets were cited as emerging threats.
"Historically high asset prices have supported consumer spending and economic growth," Cook noted, while acknowledging that a correction wouldn't necessarily signal market instability. "Significant drops are increasingly plausible," she warned, reflecting unease about stretched valuations across risk assets.
