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“One area that the Federal Reserve is monitoring is the extreme volatility evidenced by some cryptocurrencies,” Federal Reserve Governor Lael Brainard said speaking at New York University’s Stern School of Business.

Fed brainard

Brainard seemed willing to speak about risk, that topic many Fed Governors avoid. In volatile times where a stockmarket can rip up and down 500 points on a Presidents tweets on Amazon it is a welcome relief that someone shares concerns about market risk. With Bitcoin now retraced over 60% of its price and other cryptocurrencies more it seems a little late though to saying the Fed is watching cryptos. Whether the herd would have listened is another matter of course.

“For instance, Bitcoin rose over 1,000 percent in 2017 and has fallen sharply in recent months.” While these markets may raise important investor and consumer protection issues, she said it was less clear if they could pose a threat to financial stability.

Brainard Highlighted Risk

“Estimates of risk premiums and spreads in a range of markets remain narrow by historical standards,”

#Corporate bond yields are low, while spreads on high-yield bonds over Treasuries are near the low-end of their historical range"

Brainard said tax cuts and government spending signed by President Donald Trump “should boost the economy”

“It is hard to know with precision how the economy is likely to respond,”

“Historically, such episodes tended to see a risk of accelerating inflation in earlier decades or a risk of financial imbalances in more recent decades."

“Asset prices might be particularly susceptible to an unexpected development that accentuates downside risks to the macroeconomic outlook,” 

Source: Bloomberg, Reuters



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