Nagging inflation pressures, leading to tight money, cited as biggest risk ahead for financial stability

Persistent inflationary pressures leading to a more restrictive than expected monetary policy stance is the most frequently cited risk to financial stability by researchers, academics and market participants, according to a report issued late Friday by the Federal Reserve.

Other areas of concern outlined in the report include:

  • Policy uncertainty as a risk to the financial system stood at just under two-thirds of participants, significantly higher than those cited in the stability report for October.
  • More than half of all survey participants mentioned the potential effect of large realized losses on commercial real estate (CRE) and residential real estate, down from three-fourths of all participants in the previous survey.
  • Risks associated with the reemergence of banking-sector stress and with fiscal debt sustainability in advanced economies followed as the next most cited concern.

The Fed typically publishes the report at least twice a year.

April 2024 Federal Reserve Financial Stability report

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