Fed forms committee to monitor asset price bubbles

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The US Federal Reserve has created a committee to monitor financial stability and help prevent the emergence of asset price bubbles.

Vice chairman Stanley Fischer will lead the committee, according to Bloomberg, accompanied by governors Daniel Tarullo and Lael Brainard.

Policymakers will focus on ensuring the years of historically low interest rates do not encourage the type of risk-taking seen in the years before the financial crisis.

It follows the creation of a similar Financial Policy Committee in the UK by the Bank of England in 2012.

UBS Securities deputy US chief economist Drew Matus said the central bank is putting a "varsity team" in place for the new committee, but added: "whether or not they are going to be able to call bubbles better than anyone else is really is an open question."

It comes as the Fed prepares for its latest monthly policy meeting this week. The recent strength of the US dollar may indicate market expectations of a change in language from the central bank, perhaps preparing the ground for a rise in interest rates early next year.

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