U.S. Representative Ed Royce (R-Calif.), Chairman of the House Foreign Affairs Committee, questioned Chair of the Federal Reserve Board of Governors Janet Yellen at the House Financial Services Committee hearing “Monetary Policy and the State of the Economy” today. Topics of discussion included stock market volatility in relation to monetary policy and the avoidance of zero or negative interest rates in the United States regardless of other nations’ policies.
“I am worried that the Federal Reserve has created a third pillar of monetary policy – that of a stable and rising stock market. I say that because then-Chairman Bernanke when he appeared here stated repeatedly that the goal of QE was to increase asset prices like the stock market to create a wealth effect. It would stand to reason then that in deciding to raise rates and reduce the Fed’s QE balance sheet, standing at a still-record $4.5 trillion, one would have to be prepared to accept the opposite result – a declining stock market and a slight deflation of the asset bubble that QE created. Yet, every time in the past three years when there has been a hint of raising rates, and the stock market has declined …read more
Source:: U.S. Rep. Ed Royce