Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Fed's Yellen: Low rates can fuel bubbles

By Annalyn Censky, staff reporter


DENVER (CNNMoney.com) -- When low interest rates stay too low for too long, easy money can fuel asset bubbles, Janet Yellen told a room full of economists Monday, in her first public remarks as the Federal Reserve's new vice chairwoman.

Yellen confirmed in her speech that the central bank is aware of some of the risks of its policy of holding rates at historic lows, but she didn't go so far as to hint at the Fed's next move.

"It is conceivable that accommodative monetary policy could provide tinder for a buildup of leverage and excessive risk-taking in the financial system," she told a packed ballroom at the National Association of Business Economics conference in Denver, Monday.

In an effort to stimulate the economy, the Federal Reserve has held interest rates unchanged between 0% and 0.25% since December 2008.

As the economic recovery has shown signs of weakness this year, the Fed has adamantly stuck to that policy, with all but one member of the Fed's policymaking committee voting in favor of keeping rates "exceptionally low" for an "extended period"

Wall Street has recently turned its attention to the Fed's next policymaking meeting in November. There is much speculation that the Fed will expand its so-called policy of quantitative easing by announcing a new round of asset purchase.

Yellen offered little clues as to what the central bank will do in November. But she did say regulators need to have rules in place to prepare "to take away the punch bowl" of stimulative monetary policy.

Yellen also pushed for stronger rules and regulations on the financial sector, in line with a sweeping Wall Street reform bill signed into law by President Obama earlier this year. To top of page

Index Last Change % Change
Dow 18,339.24 110.94 0.61%
Nasdaq 5,318.55 12.84 0.24%
S&P 500 2,171.37 11.44 0.53%
Treasuries 1.57 0.01 0.71%
Data as of 8:08am ET
Company Price Change % Change
Procter & Gamble Co 89.46 1.10 1.24%
Bank of America Corp... 15.38 0.09 0.59%
Chesapeake Energy Co... 6.75 0.52 8.35%
Transocean Ltd 10.02 0.60 6.37%
Micron Technology In... 17.44 -0.56 -3.11%
Data as of Sep 28
Sponsors

Sections

California's state Treasurer is suspending its business relationship with Wells Fargo over the next year due to the bank's opening of unauthorized accounts. More

With tougher enforcement of immigration laws and more undocumented workers leaving the country, American farmers say they are facing a severe worker shortage -- and they can't get American workers to fill the jobs. More

Many of the biggest tech companies are joining forces to establish best practices for developing artificial intelligence. More

A new report assesses the affordability, quality and availability of child care in every state. Connecticut ranks best overall, while West Virginia comes in last. More