Fed: Inflation seen as biggest financial risk
The US Federal Reserve (Fed) reported that persistent inflation and monetary tightening are seen as the biggest risks to financial stability.
The Fed published the April issue of the Financial Stability Report, which includes evaluations of the current situation in the American financial system.
The report noted that the effects of persistent inflation and tight monetary policy remain the most cited risks among market participants.
The report stated that most market participants stated that the re-acceleration of inflation could keep interest rates higher for longer than expected. “The risk that persistent inflationary pressures would lead to a more restrictive monetary policy stance than expected continued to be the most frequently mentioned risk.” expressions were used.
Middle East and Ukraine are risks for the global economy
It was noted in the report that approximately two-thirds of the participants saw policy uncertainty as a risk, and pointed out many areas of uncertainty, including trade policy and other foreign policy issues related to increasing geopolitical tensions. The report also stated that policy uncertainty regarding the presidential elections to be held in the USA in November was also expressed.
Conflicts in the Middle East and Russia’s ongoing war in Ukraine pose risks to global economic activity, including the possibility of continued disruption in energy and commodity markets and global value chains, the Fed said in its report.
The report pointed out that further increase in geopolitical tensions or policy uncertainty could reduce economic activity, and this could increase inflation and volatility in financial markets.