Fed warns about potential for ‘significant declines’ in asset prices as valuations climb

“High asset prices in part reflect the continued low level of Treasury yields.

In an accompanying statement, Fed Governor Lael Brainard said the situation bears watching and points out the importance of making sure the system has proper safeguards.

“Vulnerabilities associated with elevated risk appetite are rising.

The Fed goes into a few specific scenarios that show potential risks to the system.

A survey the Fed conducted across a variety of 24 market contacts showed that the biggest worry is virus-related, specifically focusing on vaccine-resistant variants.

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