No underlying structural worries about the plumbing of the financial markets have arisen in last week’s social-media fueled jumps in stocks like GameStop
and AMC Entertainment Holdings
said Robert Kaplan, the president of the Dallas Fed, on Tuesday.
“I don’t see anything right now that is systemic,” Kaplan said, in an interview on CNBC.
Kaplan said he was watching very carefully and was focused on financial stability questions in the non-bank financial markets and funding risks.
He said one of several factors in the market moves was the substantial amount of liquidity stemming from the Fed’s easy monetary policy.
“I still think we need to be doing what we’re doing right now in the teeth of the pandemic,” Kaplan said.
The Fed has pushed its policy interest rate to zero and is buying $120 billion per month of Treasurys and mortgage-backed securities.
“As the economy moves beyond the pandemic, “it will be healthier for the Fed to start limiting this liquidity and normalizing monetary policy,” he said.
Kaplan has forecast a solid rebound in growth this year, and predicts the economy will grow at a 5% rate with inflation still below the Fed’s 2% target.
The Dallas Fed president, who is not a voting member of the Fed’s interest-rate committee this year, refused to engage on the timing of any reduction of the Fed’s bond-buying.
“I’ll probably avoid talking about timing and I want to avoid being rigid and predetermined about when we’re going to move beyond this pandemic,” he said.
Stocks jumped on Tuesday as last week’s volatile market conditions continued to subside, with the Dow Jones Industrial Average
up 334 points in early trading,