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Yellen, Janet L. on 2017 July 12 at 10:00

I try not to opine on the level of asset prices, although our report notes that valuations, generally, are toward the top of their historical ranges. What I try to think about is, if there are adjustments in asset prices, what consequences would they have on our financial system, in our economy.  And, in that context, look for evidence that searching asset prices might be leading to imprudent borrowing, a build up in leverage in the economy that would be dangerous if the prices were to unwind. And we're not seeing that so ...  financial stability risks, at this point, [appear] moderate.

In looking at asset prices and valuations, we try not to opine on whether they are correct or they're not correct. But as you asked what the potential spillovers or impacts on financial stability could be of asset price revaluations, my assessment of that is that, as asset prices have moved up, we have not seen a substantial increase in borrowing based on those asset price movements. We have a financial system, a banking system that's well-capitalized and strong, and I believe it's resilient.  [And later...] I try not to opine on the level of asset prices, although our report notes that valuations, generally, are toward the top of their historical ranges. What I try to think about is, if there are adjustments in asset prices, what consequences would they have on our financial system, in our economy.  And, in that context, look for evidence that searching asset prices might be leading to imprudent borrowing, a build up in leverage in the economy that would be dangerous if the prices were to unwind. And we're not seeing that so ... [we judge that] financial stability risks, at this point, are moderate. Yellen, Janet L.

Testimony to House Financial Services Committee

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