Sometimes what’s not said is more important than what’s said. In a speech today, Federal Reserve chief Janet Yellen said nothing about the risk that easy monetary policy will inflate asset bubbles. Leaving that topic out of her speech could be taken as a sign that bubbles are not at the top of her list of concerns—which could make her more willing to keep interest rates low to strengthen economic growth.
Yellen certainly knows that asset bubbles are on the minds of investors and analysts. They’ve been a prime concern of one of her Federal Reserve Board colleagues, Jeremy Stein, who announced earlier this month that he will resign on May 28 to return to teaching at Harvard University.
She certainly had the time and opportunity to bring up bubbles. Her prepared remarks to the Economic Club of New York were 3,830 words long and were followed by extensive remarks in a question-and-answer session.
Last November, in her confirmation hearing for the Fed chairmanship, Yellen told the Senate Banking Committee that the Fed is devoting “a good deal of time and attention to monitoring asset prices in diferent sectors” to see if bubbles are forming. Even then she didn’t seem exceptionally worried. She said, “I don’t see evidence at this point in major sectors of asset-price misalignments, at least of a level that would threaten financial instability.”
The Financial Times’ Cardiff Garcia also made note of the curious incident today. He wrote, “In this speech, financial stability concerns weren’t raised at all.”