The Federal Reserve’s massive asset purchase program is one reason for the recent Reddit-fueled trading frenzy in stocks including GameStop, Dallas Federal Reserve Bank President Robert Kaplan said on Tuesday, though he said that so far he does not see any systemic financial stability risks.
“Some of the current situation you are seeing – one of the factors – is there is a lot of liquidity, and some of that relates to Fed purchases of $80 billion of Treasuries and $40 billion of mortgage-backed securities every month: I think it’s wise for us to acknowledge that,” Kaplan told CNBC. “I still think we need to be doing what we are doing right now, in the teeth of the pandemic, but again, I think if we go beyond it, it will be healthier to start limiting this liquidity and normalizing policy down the road.”
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