Gotrade News - A prominent US economist is warning that stock-market bubble risk is building as he believes the Federal Reserve is shifting toward easier policy while inflation remains above target. The comments are landing at a time when markets are highly sensitive to any hint that the Fed is prioritising growth over price stability.
Key Takeaways:
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Steve Hanke argues the Fed has pivoted toward easier policy even as headline inflation is cited at 2.7%.
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He points to changes in balance-sheet policy, including pausing QT and plans to buy $40B in Treasury bills.
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Hanke says looser money could inflate equity valuations and lift hard assets, while raising inflation risks.
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Finbold reported that Steve Hanke, a professor of applied economics at Johns Hopkins University, said the Fed has already backed off its inflation fight and is moving toward looser monetary conditions under political pressure.
In an interview on The David Lin Report, Hanke argued that public attacks on the Fed are meant to push policymakers to loosen financial conditions. He cited December headline CPI inflation at 2.7%, the same level as November, still above the Fed’s 2% target.
He also pointed to the Fed’s balance-sheet stance as a key signal. Hanke said the Fed paused quantitative tightening in December and started expanding its balance sheet again, including a plan to buy $40 billion in Treasury bills.
In his view, that looks like monetising the deficit, which can raise the money supply and make inflation stickier. He summed up his concern in plain terms, saying there is “definitely a bubble in the stock market.”
Hanke also criticised President Trump’s proposal to cap credit-card interest rates at 10%, calling it a form of price control. He added that upcoming regulatory changes could give commercial banks more room to lend, potentially accelerating credit growth and money creation.
On markets, he expects looser money to keep supporting hard assets. He pointed to strong levels in gold, silver, platinum, and copper, and said lithium appears to be turning higher as well.
For investors, the practical takeaway is to watch the policy mix, not just the headlines. If the Fed is indeed easing before inflation fully cools, risk assets can stay supported, but volatility can also rise if inflation expectations re-accelerate.
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Reference:
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Finbold, Economics professor warns ‘we definitely have a bubble in the stock market’. Diakses pada 20 Januari 2026
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