Economist's Insights

Vice Chair Fischer Eyeing Asset Prices

Jun 27, 2017

In a speech around lunch on Tuesday, Fed Vice Chair Fischer said “There is no doubt the soundness and resilience of our financial system has improved since the 2007-09 crisis. We have a better capitalized and more liquid banking system, less run-prone money markets, and more robust resolution mechanisms for large financial institutions. However, it would be foolish to think we have eliminated all risks.” He cautioned that rising risk appetites should be closely watched and said high asset prices could lead to future stability risks. Elevated P/E ratios and a “notably leveraged” corporate sector were two risks he highlighted, although he did note the corporate debt picture had improved recently.