Federal Reserve policymakers believe financial market asset prices are high, according to the central bank's "Monetary Policy Report" to Congress on Friday.
"Valuation pressures continue to be elevated across a range of asset classes, including equities and commercial real estate," the report said. "Over the second half of 2017, valuation pressures edged up from already elevated levels. In general, valuations are higher than would be expected based solely on the current level of longer-term Treasury yields."
The Fed noted the price-earnings ratios for U.S. stocks were "close to their highest levels outside of the 1990s."
The central bank's "elevated" valuation comments are noteworthy given the market has sold off since late January. The S&P 500 has declined 4 percent in February through Thursday.
The Fed also is not too concerned yet over the levels of debt in the banking sector.
"Overall vulnerabilities in the U.S. financial system remain moderate on balance," the report said. "Vulnerabilities from leverage in the financial sector appear low, reflecting in part capital and liquidity ratios of banks that have continued to improve from already strong positions."