The Fed increases its concern for corporate indebtedness and excessive asset value

The Federal Reserve of the United States (Fed) was alert for the possible implications for the financial and economic stability of the country that could have the current moment of high corporate indebtedness and overvaluation of assets.

This follows from the minutes of the monetary policy meeting held by the agency at the end of January, when it decided to keep interest rates unchanged in an objective range of between 1.50% and 1.75%, at the same time that warned that he was monitoring the possible implications for the US economy of the outbreak of coronavirus that emerged in Wuhan (China).

Specifically, during the conclave that took place between January 28 and 29, some members of the Federal Open Market Committee (FOMC), the small Fed group that sets monetary policy, showed their concern about “excessive imbalances”, something that could amplify an economic shock.

“The asset valuation pressures have increased in recent months to a high level,” you can read in the document, which warns that the debt ratio of companies with respect to gross domestic product (GDP) It is “high” with respect to “historical standards”.

These participants also warned that the current situation, with low interest rates and a solid labor market, could increase the risk appetite of investors, which poses a threat to financial stability.

Other members of the FOMC also emphasized the increases in dividend payments of US banks, as well as their intention to reduce their capital buffers, which would reduce their ability to respond to an adverse economic situation.

With regard to the general forecast of the economy, most Fed members agreed that some risks from trade tensions had been reduced after the signing of 'Phase 1' of the agreement between Washington and Beijing . However, the coronavirus outbreak, the decline in business investment and the decline in exports and manufacturing production remained as risk sources.