The Federal Reserve (Fed) revealed in its financial stability report that high inflation, volatility in stock and other commodity markets as well as the war in Ukraine have emerged as major risks to the US financial system.
In the report, which is updated twice a year, the Fed warns that the risk of a sudden significant downturn appears to be higher than usual.
This is due to the drastic surge in US treasury yields, war -related problems in the oil market and other factors have burdened some parts of the financial system.
Fed Governor Lael Brainard said that households and businesses have reduced their borrowing and currently appear to have the resources to cover the debt burden, which is an important aspect of resilience in an environment of rising interest rates.
The report is the first to take into account the rapid shifts in the financial landscape that have taken place since last November, including more aggressive monetary tightening by the Fed, a surge in inflation and the Russia-Ukraine war.
Volatility in the U.S. stock market has been on the rise in recent weeks following a high surge in U.S. bond yields following expectations of an interest rate hike by the Fed to fight inflation.
