Fed's Bernanke downplays asset bubble worries: Bloomberg

NEW YORK Fri Feb 22, 2013 11:09am EST

U.S. Federal Reserve Chairman Ben Bernanke speaks during a news conference in Washington December 12, 2012. REUTERS/Kevin Lamarque

U.S. Federal Reserve Chairman Ben Bernanke speaks during a news conference in Washington December 12, 2012.

Credit: Reuters/Kevin Lamarque

NEW YORK (Reuters) - Federal Reserve Chairman Ben Bernanke downplayed worries the U.S. central bank's monetary policy has fueled asset bubbles that could hurt the economy in a meeting with bond dealers and investors in early February, Bloomberg reported on Friday.

Bernanke expressed his view in a private meeting with the Treasury Borrowing Advisory Committee, Bloomberg said, citing three people with knowledge of the discussions.

The committee advises the government on how to raise money in the debt market.

Bernanke brushed off the risks of asset bubbles after participants at the meeting raised concerns about farmland prices, growth of mortgage real estate investment trusts and falling yields on junk bonds as possible signs of asset bubbles, according to Bloomberg.

Fed spokeswoman Michelle Smith declined to comment when asked about the Bloomberg report.

Asset bubbles occur when excessive speculation overheats prices on investments, including stocks and housing. When they burst they can damage the economy.

Minutes of the Fed's January 29-30 policy meeting released on Wednesday showed some officials expressed concerns the Fed's current bond purchase program "could foster market behavior that could undermine financial stability."

The Fed has been buying a combined $85 billion a month in Treasuries and mortgage-backed securities as a part of its quantitative easing policy with the goal to reduce unemployment.

Wall Street stocks fell on Wednesday and Thursday as investors sold their holdings on worries the Fed might reduce or stop its bond purchases earlier than previously thought. The Standard & Poor's 500 index .SPX lost 1.9 percent, its biggest two-day drop since early November. The index was up 0.4 percent on Friday in midmorning trading.

(Reporting by Richard Leong; Editing by James Dalgleish)

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