WASHINGTON, April 10 Federal Reserve staff
conducted a wide survey but found no evidence so far that the
U.S. central bank's ultra-low interest rate policy has
encouraged excessive risk-taking, the Fed said on Wednesday. But
it will keep the issue under close watch.
Minutes of the Fed's March 19-20 meeting noted Fed staff had
investigated concerns voiced by some policymakers that near-zero
rates might lead to excessive risk-taking as investors 'reach
for yield', which could foster asset bubbles in certain markets.
"Low interest rates likely have supported gains in asset
prices and encouraged the flow of credit to households and
businesses, but these changes to date do not appear to have been
accompanied by significant financial imbalances," the minutes
The Fed voted at the March meeting to maintain bond
purchases at a monthly pace of $85 billion, and to hold rates
between zero and 0.25 percent at least until U.S. unemployment
hit 6.5 percent, provided inflation stayed under 2.5 percent.
The U.S. jobless rate in March was 7.6 percent.
Fed Chairman Ben Bernanke has repeatedly stressed that he
takes the potential costs of bond purchases very seriously, in a
hint that the bond buying program might get scaled back if its
costs began to outweigh the perceived benefits.
The minutes underscored the Fed does not believe that to be
the case yet. But the minutes did acknowledge that something
might be going on, based on a wide survey of financial markets
and institutions for signs of excess valuations, leverage or
risk-taking, which could pose a wider risk to the system.
"Trends in a few specifics markets bore watching, and the
staff will continue to monitor for signs of developments that
could pose risks to financial stability," the minutes said.
Policy hawks uncomfortable with the Fed's extremely
aggressive actions to spur the U.S. jobs market fear it could be
laying the ground for a repeat of the next financial crisis.
Kansas City Fed President Esther George specifically warned
last week that sharp rises in farmland prices as well as on
high-yield bonds were reasons for caution when debating how long
to maintain the Fed's extraordinarily easy monetary policy.