Janet Yellen and Bubbles

Ms. Yellen stakes out her position in about as clear a language as you’ll see from a central banker: She believes that it would most likely be a bad idea to raise interest rates to fight financial excesses. Her focus, crucially, is not on preventing Wall Street from having ups and downs, but on making sure that those ups and downs don’t bring economic disaster.This focus on resilience differs from much of the public discussion, which often concerns whether some particular asset class is experiencing a “bubble,” and whether policy makers should attempt to pop the bubble. Because a resilient financial system can withstand unexpected developments, identification of bubbles is less critical.

via Janet Yellen Signals She Won’t Raise Rates to Fight Bubbles – NYTimes.com.

About mkevane

Economist at Santa Clara University and Director of Friends of African Village Libraries.
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