Federal Reserve Chairman Jerome Powell on Wednesday said the central bank’s policies are not the main driver for higher asset prices, but market expectations for a return to normal.

“It’s been expectations about vaccines and also fiscal policy — those are the news items that have been driving asset values in recent months,” Powell said in a press conference Wednesday.

The central bank maintained its interest rate target at near-zero on Wednesday and reiterated its commitment to at least $120 billion a month in asset purchases until “substantial further progress” is made on the recovery.

Despite a vicious recession triggered by the pandemic, several asset classes have logged substantial gains and recovered well more than they lost during the depths of the crisis. The S&P 500 is up over 13% over the past 12 months (meaning it is 13% higher than even pre-pandemic levels) and home price growth is at a level not seen in almost seven years.

Public interest in asset prices appear to be heightened with the meteoric run-ups in “meme stocks” like Gamestop (GME), as redditors on r/WallStreetBets spar with hedge funds with short positions. The buzz has triggered questions about whether or not the Fed sees financial stability risks stemming from such market activity.

Asked about Gamestop though, Powell declined to answer.

“I don't want to comment on a particular company or day's market activity or things like that,” Powell said.

Financial stability concerns

Broadly, Powell said that the connection between low interest rates and asset values is “probably not something that’s as tight as people think.”

The Fed chief added that monetary policy “does play a role” in asset pricing. He acknowledged, for example, that the housing sector has “more than fully recovered” due largely to low mortgage interest rates.

But Powell suggested that the main driver for asset prices is investor optimism over getting to a post-COVID-19 pandemic economy.

The Biden administration hopes to pass a $1.9 trillion stimulus program through the Democratic-led U.S. House of Representatives and Senate. All the while, the White House is pushing to ramp up the vaccine distribution to a pace of about 10 million doses weekly.

For now, Powell insisted that financial stability vulnerabilities “overall are moderate.”

Financial stability is an important consideration for the Fed. The Federal Open Market Committee has committed itself to low-interest rates and an aggressive pace of asset purchases until it can reduce shortfalls of unemployment and moderately overshoot its 2% inflation target.