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Persistent inflation and tighter monetary policy are the primary risks to the U.S. financial system, according to the Federal Reserve’s semiannual Financial Stability Report.
Details: The report also notes significant concerns over policy uncertainty, heightened by geopolitical tensions and the upcoming U.S. elections, cited by 60% of respondents. Other risks include cyberattacks, US-China tensions, and ongoing Middle East conflicts.
Commercial real estate concerns and banking sector stress have decreased as stability risks compared to previous surveys. However, leverage at hedge funds has reached record levels, and funding pressures continue for some banks due to issues like uninsured deposits. The Bank Term Funding Program saw 1,804 of over 9,000 eligible institutions participate, with 95% of these having assets under $10 billion.