Fed Downplays Fears of High Consumer Debt

NEW YORK – U.S. consumers are in good financial shape, a top Fed official said on Monday, dismissing fears that high levels of household debt are unsustainable.

Concerns about a housing market bubble are also overdone, Minneapolis Federal Reserve President Gary Stern said, arguing that the sector’s strength is based on solid fundamental demand.

Some economists have worried that steep consumer debt levels at a time when interest rates are rising and the labor market is still ailing could make for a dangerous combination, potentially hurting economic growth down the line.

But Stern was more sanguine.

“I personally think concern about consumer debt is exaggerated in many quarters,” Stern said, noting that household net worth is at an “all-time high.”

“Overall, on average, consumers are in pretty good financial shape,” Stern said in response to questions before a gathering of risk managers.

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