Janet Yellen: Price-earnings ratios are near high end of historical ranges

Business | 5 Feb 2018 1:53 pm

Some asset valuations are high, Janet Yellen told a US news network on Friday as she packed up to leave her office at the Federal Reserve.

Asked about her views of the stock market, Yellen told CBS: "Well, I don't want to say too high. But I do want to say high. Price-earnings ratios are near the high end of their historical ranges.  If you look at commercial real estate prices, they are quite high relative to rents.  Now, is that a bubble or is too high?  And there it's very hard to tell.  But it is a source of some concern that asset valuations are so high. 

"What we look at is, if stock prices or asset prices more generally were to fall, what would that mean for the economy as a whole?  And the financial system is much better capitalized. The banking system is more resilient.  And I think our overall judgment is that, if there were to be a decline in asset valuations, it would not damage unduly the core of our financial system.'' 

She also told CBS's Rita Braver, she was disappointed that US President Donald Trump didn’t offer her a second term as Federal Reserve chair, but supports her central bank successor, Jerome Powell, who takes over on Monday (US time).

Powell, a Fed board member since 2012, is "thoughtful, balanced, dedicated to public service. I’ve found him to be a very thoughtful policymaker,” Yellen told CBS’s "Sunday Morning.”

Yellen, appointed by President Barack Obama, was the first woman to lead the Fed. Her four-year term ended Friday. She is joining the Brookings Institution think tank.

Yellen noted that it has been common for Fed chairs to receive a second term even when they were first nominated by a president of the other party.

"I made clear that I would be willing to serve another term and so yes, I do feel a sense of disappointment,” she said.

Trump was highly critical of Yellen during the 2016 campaign, but took to praising her after becoming president. Nonetheless, he decided against reappointing the Democrat in favor of nominating Republican Powell.

Before becoming Fed chair in 2014, Yellen had served as the central bank’s vice chair and was president of the Fed’s San Francisco regional bank.

"I’ve been in high level positions in the Federal Reserve for many years, where I think I’ve had a seat at the table to make the arguments that I thought needed to be made and to advocate for good policy,” Yellen said.-AP/The Standard. Photo: CBS News

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