(MENAFN) US Federal Reserve Chair Jerome Powell warned Tuesday that equity prices—a category encompassing stocks and other riskier assets—are "fairly highly valued."

Speaking in Rhode Island, Powell was asked whether the Fed is more tolerant of elevated asset prices and how much influence market valuations have on policy decisions.

“We do look at overall financial conditions, and we ask ourselves whether our policies are affecting financial conditions in a way that is what we’re trying to achieve,” Powell said. “But you’re right, by many measures, for example, equity prices are fairly highly valued.”

Last week, the Fed trimmed its policy rate for the first time this year, fueling expectations for additional cuts and sparking a surge in stock markets to record highs.

“Markets listen to us and follow and they make an estimation of where they think rates are going. And so they’ll price things in,” Powell explained.

Despite noting elevated equity valuations, Powell asserted this is "not a time of elevated financial stability risks."

Following Powell’s comments, the New York Stock Exchange reversed course, sliding after an initially positive open.

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