At a time when interest rates are at or near global lows, market watchers have been hand-wringing across 2016 about the "reach for yield," or investors' willingness to pile into riskier assets at a time when staid investments like bonds are yielding next-to-nothing — or even less than nothing.
Not Janet Yellen, though.
She noted in her question-and-answer session on Wednesday that in the current environment, many investors are going to be more likely to reach for yield. And that could take on many forms, from high-yield debt to support riskier M&A deals, or stocks trading at high multiples in a market that has been given a lift over the years by easy monetary policy.
While she expressed concern that the reach for yield creates risk, Yellen said that this risk is "moderate," and that she doesn't believe markets are overheating due to historically low interest rates. Now that the Fed is cutting forward-looking forecasts and projections, it looks like there will be more reaching for yield.
Market watchers have been carefully tracking Fed officials' language in anticipation of Thursday's decision. The United States has maintained historically low interests rates for a decade and last experienced a rate increase in December 2015.