How can a central bank's reduction in the discount rate potentially lead to asset bubbles in the economy?

When a central bank reduces the discount rate, it makes borrowing money cheaper for banks and, in turn, for consumers and businesses. This encourages more people to take out loans and spend money, leading to increased demand for goods and services. As demand rises, prices for certain assets, like stocks or real estate, can also increase quickly, sometimes beyond their actual value. For example, if many people start buying homes because they can afford lower mortgage payments, the price of houses may soar, creating a bubble. If the bubble bursts, it can lead to significant economic problems, as people may find themselves with assets worth much less than what they paid.