REUTERS
"US economic activity expanded slightly in recent weeks, Fed says"
By Reuters
April 17, 2024
April 17 (Reuters) - U.S. economic activity expanded slightly from late February through early April and firms signaled they expect inflation pressures to hold steady, a Federal Reserve survey showed on Wednesday, continuing recent trends that have kept the central bank from being able to cut interest rates.
The U.S. central bank released its latest snapshot on the health of the economy a day after Fed Chair Jerome Powell ditched previous guidance on when its benchmark interest rate may be cut and instead said monetary policy needs to be restrictive for longer due to a string of stronger-than-expected inflation readings.
"Overall economic activity expanded slightly ..."
"Ten out of twelve Districts experienced either slight or modest economic growth," the Fed said in the survey known as the "Beige Book," which polled business contacts across the central bank's 12 districts through April 8.
"The economic outlook among contacts was cautiously optimistic, on balance."
Up until the turn of the year, Powell and his colleagues had been buoyed by data that showed inflation, which spiked to a 40-year high two years ago, drifting downwards toward the Fed's 2% target rate, even amid strong economic growth and a low unemployment rate.
However, that momentum has stalled and even reversed, calling into question whether the Fed, which in March provisionally penciled in three rate cuts this year, will be able to cut its policy rate in the coming months.
Investors now only expect a first cut in September and the odds of a second cut are dwindling.
INFLATION TO HOLD STEADY
In the Fed's survey, the pace of price increases was described overall by firms as modest on average, but six of the central bank's districts noted moderate increases in energy prices and contacts in a few of them, mostly manufacturers, saw upside risks in the near-term in both input and output prices.
"On balance, contacts expected that inflation would hold steady at a slow pace moving forward," the survey noted, even as firms frequently said their ability to pass cost increases on to consumers "had weakened considerably" in recent months.
The Fed is expected at the end of its April 30-May 1 policy meeting to leave its policy rate in the current 5.25%-5.50% range, where it has been since last July.
By the Fed's preferred measure, inflation in February ticked up to a 2.5% annual rate, while a gauge that strips out more volatile food and energy components, rose at a 2.8% annual rate.
Employment rose at a slight pace overall too, the Fed survey showed.
Despite more available workers, many Fed districts continued to see persistent shortages of qualified applicants for certain positions, but multiple districts said that annual wage growth rates had recently returned to historical averages.
One restaurateur, for instance, told the Cleveland Fed "we've seen wages stabilize and haven't had to escalate wages to hire good people."
Reporting by Lindsay Dunsmuir and Ann Saphir; Editing by Paul Simao
https://www.reuters.com/markets/us/us-e ... 024-04-17/
THE FEDERAL RESERVE
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Bostic says he is not in a 'mad dash hurry' on rate cuts"
By Reuters
April 18, 2024
April 18 (Reuters) - Atlanta Federal Reserve President Raphael Bostic on Thursday said inflation is going to return to the U.S. central bank's 2% more slowly than many had expected, and "for me, that's okay ... I'm not in a mad dash hurry to get there," because the economy is continuing to create jobs and wages are rising.
"I'm comfortable being patient," Bostic said during an appearance before the Greater Fort Lauderdale Alliance in Florida.
"I'm of the view that things are going to be slow enough this year that we won't be in a position to reduce our rates towards ... the end of the year."
The Fed has kept its policy rate in the 5.25%-5.50% range since last July.
Earlier this year most U.S. central bankers thought inflation was falling quickly enough to allow several rate cuts before the end of 2024.
But hotter-than-expected inflation readings so far this year have changed minds.
Bostic has been at the vanguard of that change, projecting just one rate cut in the fourth quarter, and earlier this month going so far as to suggest the Fed may end up not cutting rates at all this year.
Monetary policy, Bostic said on Thursday, is restrictive and will slow the economy and move inflation to the Fed's 2% target over the next two years.
"I'm going to be watching labor markets to make sure that we're still creating jobs" and wages continue to rise faster than inflation, he said.
"If we can keep those things going, and inflation has the signs that it is moving to that target, I'm happy to just stay where we are" on the policy rate.
Reporting by Ann Saphir; Editing by Paul Simao
https://www.reuters.com/markets/us/feds ... 024-04-18/
"Fed's Bostic says he is not in a 'mad dash hurry' on rate cuts"
By Reuters
April 18, 2024
April 18 (Reuters) - Atlanta Federal Reserve President Raphael Bostic on Thursday said inflation is going to return to the U.S. central bank's 2% more slowly than many had expected, and "for me, that's okay ... I'm not in a mad dash hurry to get there," because the economy is continuing to create jobs and wages are rising.
"I'm comfortable being patient," Bostic said during an appearance before the Greater Fort Lauderdale Alliance in Florida.
"I'm of the view that things are going to be slow enough this year that we won't be in a position to reduce our rates towards ... the end of the year."
The Fed has kept its policy rate in the 5.25%-5.50% range since last July.
Earlier this year most U.S. central bankers thought inflation was falling quickly enough to allow several rate cuts before the end of 2024.
But hotter-than-expected inflation readings so far this year have changed minds.
Bostic has been at the vanguard of that change, projecting just one rate cut in the fourth quarter, and earlier this month going so far as to suggest the Fed may end up not cutting rates at all this year.
Monetary policy, Bostic said on Thursday, is restrictive and will slow the economy and move inflation to the Fed's 2% target over the next two years.
"I'm going to be watching labor markets to make sure that we're still creating jobs" and wages continue to rise faster than inflation, he said.
"If we can keep those things going, and inflation has the signs that it is moving to that target, I'm happy to just stay where we are" on the policy rate.
Reporting by Ann Saphir; Editing by Paul Simao
https://www.reuters.com/markets/us/feds ... 024-04-18/
Re: THE FEDERAL RESERVE
REUTERS
"Fed policymakers coalesce around 'no rush' on rate cuts"
By Ann Saphir and Michael S. Derby
April 18, 2024
April 18 (Reuters) - Federal Reserve policymakers are coalescing around the idea of keeping borrowing costs where they are until perhaps well into the year, given slow and bumpy progress on inflation, and a still-strong U.S. economy.
On Thursday New York Fed President John Williams became the latest U.S. rate-setter to embrace the "no rush" on rate cuts view articulated in February by Fed Governor Christopher Waller and since echoed by many of his colleagues.
"I definitely don't feel urgency to cut interest rates" given the strength of the economy, Williams said at the Semafor's World Economy Summit in Washington.
"I think eventually...interest rates will need to be lower at some point, but the timing of that is driven by the economy."
Cleveland Fed President Loretta Mester, in comments late on Wednesday, also said the Fed will likely cut rates "at some point," steering clear of the later "this year" language she - and Williams - had previously used.
Speaking in Fort Lauderdale, Florida on Thursday, Atlanta Fed President Raphael Bostic offered "the end of the year" as his view of the likely timing for a first rate cut, saying "I'm comfortable being patient."
Minneapolis Fed President Neel Kashkari told Fox News Channel he also wants to be "patient," with the first rate cut "potentially" not appropriate until next year, Bloomberg News reported.
As recently as a few weeks ago many policymakers signaled they expected hotter-than-expected inflation in early 2024 would give way to cooler readings in the face of the Fed's tight monetary policy, necessitating several rate cuts before the end of the year to prevent policy from slowing the economy too much.
But strong growth in jobs, a third-month-in-a-row upside surprise on inflation in March, and robust retail spending among other recent economic indicators have convinced more central bankers that rate cuts ought to wait.
Earlier this week Fed Vice Chair Philip Jefferson omitted any reference to the appropriate timing for rate cuts, and Fed Chair Jerome Powell said it's likely to take longer to get enough confidence on inflation's decline to reduce borrowing costs.
As San Francisco Fed President Mary Daly put it on Monday, "the worst thing to do is act urgently when urgency is not required."
With Fed rhetoric shifting and the labor market data showing few signs of cracks, financial markets have also moved to price in fewer and later rate cuts.
Futures contracts that settle to the Fed's policy rate now reflect expectations that the first reduction comes in September, versus June just a few weeks ago.
The odds of a second rate cut by the end of the year have dropped to about 50-50, based on the CME FedWatch Tool.
A Reuters poll released on Thursday showed economists are on the same page.
Inflation by the Fed's targeted measure, the personal consumption expenditures price index, was 2.5% in February, and Fed policymakers say they expect the March reading of core PCE - a gauge of where inflation is heading - to be even higher.
The Fed targets 2% inflation.
That has even raised questions of whether the Fed may have to hike rates again to ensure price pressures ebb.
Williams said that appears unlikely but noted that it was impossible to rule out.
Fed policymakers next meet April 30-May 1 and are expected keep the policy rate in the 5.25%-5.5% range, where it has been since last July.
Reporting by Michael S. Derby and Ann Saphir; Editing by Andrea Ricci
https://www.reuters.com/markets/us/feds ... 024-04-18/
"Fed policymakers coalesce around 'no rush' on rate cuts"
By Ann Saphir and Michael S. Derby
April 18, 2024
April 18 (Reuters) - Federal Reserve policymakers are coalescing around the idea of keeping borrowing costs where they are until perhaps well into the year, given slow and bumpy progress on inflation, and a still-strong U.S. economy.
On Thursday New York Fed President John Williams became the latest U.S. rate-setter to embrace the "no rush" on rate cuts view articulated in February by Fed Governor Christopher Waller and since echoed by many of his colleagues.
"I definitely don't feel urgency to cut interest rates" given the strength of the economy, Williams said at the Semafor's World Economy Summit in Washington.
"I think eventually...interest rates will need to be lower at some point, but the timing of that is driven by the economy."
Cleveland Fed President Loretta Mester, in comments late on Wednesday, also said the Fed will likely cut rates "at some point," steering clear of the later "this year" language she - and Williams - had previously used.
Speaking in Fort Lauderdale, Florida on Thursday, Atlanta Fed President Raphael Bostic offered "the end of the year" as his view of the likely timing for a first rate cut, saying "I'm comfortable being patient."
Minneapolis Fed President Neel Kashkari told Fox News Channel he also wants to be "patient," with the first rate cut "potentially" not appropriate until next year, Bloomberg News reported.
As recently as a few weeks ago many policymakers signaled they expected hotter-than-expected inflation in early 2024 would give way to cooler readings in the face of the Fed's tight monetary policy, necessitating several rate cuts before the end of the year to prevent policy from slowing the economy too much.
But strong growth in jobs, a third-month-in-a-row upside surprise on inflation in March, and robust retail spending among other recent economic indicators have convinced more central bankers that rate cuts ought to wait.
Earlier this week Fed Vice Chair Philip Jefferson omitted any reference to the appropriate timing for rate cuts, and Fed Chair Jerome Powell said it's likely to take longer to get enough confidence on inflation's decline to reduce borrowing costs.
As San Francisco Fed President Mary Daly put it on Monday, "the worst thing to do is act urgently when urgency is not required."
With Fed rhetoric shifting and the labor market data showing few signs of cracks, financial markets have also moved to price in fewer and later rate cuts.
Futures contracts that settle to the Fed's policy rate now reflect expectations that the first reduction comes in September, versus June just a few weeks ago.
The odds of a second rate cut by the end of the year have dropped to about 50-50, based on the CME FedWatch Tool.
A Reuters poll released on Thursday showed economists are on the same page.
Inflation by the Fed's targeted measure, the personal consumption expenditures price index, was 2.5% in February, and Fed policymakers say they expect the March reading of core PCE - a gauge of where inflation is heading - to be even higher.
The Fed targets 2% inflation.
That has even raised questions of whether the Fed may have to hike rates again to ensure price pressures ebb.
Williams said that appears unlikely but noted that it was impossible to rule out.
Fed policymakers next meet April 30-May 1 and are expected keep the policy rate in the 5.25%-5.5% range, where it has been since last July.
Reporting by Michael S. Derby and Ann Saphir; Editing by Andrea Ricci
https://www.reuters.com/markets/us/feds ... 024-04-18/
Re: THE FEDERAL RESERVE
CNBC
"Fed’s Goolsbee says ‘more sniffing’ may be needed before rate cuts"
Kelli Grant, CFP @KELLIGRANT.MONEY
PUBLISHED FRI, APR 19 2024
KEY POINTS
* The path to 2% inflation is “more difficult” in 2024, Federal Reserve Bank of Chicago president Austan Goolsbee said on Friday.
* Inflation has dropped significantly since its pandemic-era peak of 9.1%, but it remains above the Fed’s target.
* Goolsbee said the Fed needs “more sniffing” before it can start cutting interest rates.
CHICAGO — The path to 2% inflation is “more difficult” in 2024, said Federal Reserve Bank of Chicago President Austan Goolsbee.
“We’re going to get to 2%,” Goolsbee said Friday during a session at the Society for Advancing Business Editing and Writing’s annual conference.
“We said it."
"That’s our stated target.“
Inflation has come down significantly from its pandemic-era peak of 9.1%, but remains stubbornly above that stated target.
The consumer price index, a broad measure of costs for goods and services across the economy, rose 3.5% in March from a year ago.
“If you take a broad view, inflation got way above where we were comfortable with and it’s down a lot,” he said.
The first three readings for this year indicate covering the remaining distance to 2% “may not be as rapid,” he added.
That “stalling” merits further investigation on the direction of the economy before the Fed moves to cut rates, said Goolsbee, who is a nonvoting member this year of the rate-setting Federal Open Market Committee.
He described himself as a “proud data dog,” and pointed to what he says is “the first rule of the kennel.”
“If you are unclear, stop walking and start sniffing,” he said.
“And with these numbers, we need to do more sniffing.”
“We want to have confidence that we are on this path to 2[%],” he said.
“That’s the thing we have got to pay attention to.”
Housing inflation is a key area to watch, Goolsbee said.
“That’s the one that has not behaved as we thought it would,” he said.
Shelter costs, which make up about one-third of the weighting in the CPI, rose 5.7% in March from a year ago.
“The market rent inflation is well down, but it hasn’t flowed through into the official measure,” he said.
“If it doesn’t — I still think it will — but if it doesn’t, I think we’re going to have a hard time."
"It’s definitely going to be more difficult to get to 2% overall if we do not see progress.”
https://www.cnbc.com/2024/04/19/feds-go ... cuts-.html
"Fed’s Goolsbee says ‘more sniffing’ may be needed before rate cuts"
Kelli Grant, CFP @KELLIGRANT.MONEY
PUBLISHED FRI, APR 19 2024
KEY POINTS
* The path to 2% inflation is “more difficult” in 2024, Federal Reserve Bank of Chicago president Austan Goolsbee said on Friday.
* Inflation has dropped significantly since its pandemic-era peak of 9.1%, but it remains above the Fed’s target.
* Goolsbee said the Fed needs “more sniffing” before it can start cutting interest rates.
CHICAGO — The path to 2% inflation is “more difficult” in 2024, said Federal Reserve Bank of Chicago President Austan Goolsbee.
“We’re going to get to 2%,” Goolsbee said Friday during a session at the Society for Advancing Business Editing and Writing’s annual conference.
“We said it."
"That’s our stated target.“
Inflation has come down significantly from its pandemic-era peak of 9.1%, but remains stubbornly above that stated target.
The consumer price index, a broad measure of costs for goods and services across the economy, rose 3.5% in March from a year ago.
“If you take a broad view, inflation got way above where we were comfortable with and it’s down a lot,” he said.
The first three readings for this year indicate covering the remaining distance to 2% “may not be as rapid,” he added.
That “stalling” merits further investigation on the direction of the economy before the Fed moves to cut rates, said Goolsbee, who is a nonvoting member this year of the rate-setting Federal Open Market Committee.
He described himself as a “proud data dog,” and pointed to what he says is “the first rule of the kennel.”
“If you are unclear, stop walking and start sniffing,” he said.
“And with these numbers, we need to do more sniffing.”
“We want to have confidence that we are on this path to 2[%],” he said.
“That’s the thing we have got to pay attention to.”
Housing inflation is a key area to watch, Goolsbee said.
“That’s the one that has not behaved as we thought it would,” he said.
Shelter costs, which make up about one-third of the weighting in the CPI, rose 5.7% in March from a year ago.
“The market rent inflation is well down, but it hasn’t flowed through into the official measure,” he said.
“If it doesn’t — I still think it will — but if it doesn’t, I think we’re going to have a hard time."
"It’s definitely going to be more difficult to get to 2% overall if we do not see progress.”
https://www.cnbc.com/2024/04/19/feds-go ... cuts-.html
Re: THE FEDERAL RESERVE
REUTERS
"Fed policy on hold because of 'stalled' progress on inflation, Goolsbee says"
By Ann Saphir
April 19, 2024
April 19 (Reuters) - Progress on bringing down inflation has "stalled" this year, Chicago Federal Reserve President Austan Goolsbee said on Friday, becoming the latest U.S. central banker to drop an earlier focus on the coming need for interest rate cuts.
"Given the strength of the labor market and progress on easing inflation seen over a longer arc, I believe the Fed's current restrictive monetary policy is appropriate," Goolsbee said during an appearance before a business journalism group in Chicago.
"I think we have to recalibrate and we have to wait and see."
The belief that rates will need to stay high for longer to get price pressures moving down again is now the dominant view at the Fed.
The U.S. central bank has kept its policy rate in the 5.25%-5.50% range since last July, and just a few weeks ago most policymakers, including Goolsbee, thought at least three rate cuts this year would be appropriate.
Three months of higher-than-expected inflation data "can't be dismissed," and the Fed will need to determine if continued strong growth in the economy and job market is a sign of overheating, Goolsbee said.
Though higher productivity and labor force participation, driven partly by immigration, suggest there is "space for progress" on services inflation, he said, persistently high housing inflation remains the main threat to price stability.
"It is supposed to have been falling," he said, citing the decline in market data on new leases.
"If it doesn't, it will be hard to see a smooth path back to our 2% inflation goal."
Goolsbee notably did not rule out a fresh rate hike in the face of disappointingly sticky inflation, but he also said the Fed may need to reduce borrowing costs if inflation resumes its decline.
"We're just trying to figure out ... what is necessary, how restrictive do we need to be ... we have weeks, months to find out," he said.
"Ultimately the proper policy going forward will depend on the data."
Economists and traders now expect the Fed will hold rates steady at its next three policy meetings, with a rate cut coming at the Sept. 17-18 session.
Financial market bets against any more than one reduction in borrowing costs this year also have risen.
Reporting by Ann Saphir; Editing by Paul Simao
https://www.reuters.com/markets/us/feds ... 024-04-19/
"Fed policy on hold because of 'stalled' progress on inflation, Goolsbee says"
By Ann Saphir
April 19, 2024
April 19 (Reuters) - Progress on bringing down inflation has "stalled" this year, Chicago Federal Reserve President Austan Goolsbee said on Friday, becoming the latest U.S. central banker to drop an earlier focus on the coming need for interest rate cuts.
"Given the strength of the labor market and progress on easing inflation seen over a longer arc, I believe the Fed's current restrictive monetary policy is appropriate," Goolsbee said during an appearance before a business journalism group in Chicago.
"I think we have to recalibrate and we have to wait and see."
The belief that rates will need to stay high for longer to get price pressures moving down again is now the dominant view at the Fed.
The U.S. central bank has kept its policy rate in the 5.25%-5.50% range since last July, and just a few weeks ago most policymakers, including Goolsbee, thought at least three rate cuts this year would be appropriate.
Three months of higher-than-expected inflation data "can't be dismissed," and the Fed will need to determine if continued strong growth in the economy and job market is a sign of overheating, Goolsbee said.
Though higher productivity and labor force participation, driven partly by immigration, suggest there is "space for progress" on services inflation, he said, persistently high housing inflation remains the main threat to price stability.
"It is supposed to have been falling," he said, citing the decline in market data on new leases.
"If it doesn't, it will be hard to see a smooth path back to our 2% inflation goal."
Goolsbee notably did not rule out a fresh rate hike in the face of disappointingly sticky inflation, but he also said the Fed may need to reduce borrowing costs if inflation resumes its decline.
"We're just trying to figure out ... what is necessary, how restrictive do we need to be ... we have weeks, months to find out," he said.
"Ultimately the proper policy going forward will depend on the data."
Economists and traders now expect the Fed will hold rates steady at its next three policy meetings, with a rate cut coming at the Sept. 17-18 session.
Financial market bets against any more than one reduction in borrowing costs this year also have risen.
Reporting by Ann Saphir; Editing by Paul Simao
https://www.reuters.com/markets/us/feds ... 024-04-19/
Re: THE FEDERAL RESERVE
REUTERS
"Fed report cites inflation, US election as key financial stability risks"
By Howard Schneider and Pete Schroeder
April 19, 2024
WASHINGTON, April 19 (Reuters) - Persistent inflation and higher-for-longer interest rates were cited as key risks to financial stability in the Federal Reserve's latest survey of U.S. central bank contacts, with geopolitical troubles and the 2024 U.S. presidential election also mentioned as "a potentially significant source of shocks."
"Contacts noted several areas of uncertainty including trade policy and other foreign policy issues related to escalating geopolitical tensions," the Fed said on Friday in its semi-annual survey of 25 market participants, academics and other contacts.
"They also noted policy uncertainty associated with the U.S. elections in November," when the Democratic incumbent Joe Biden faces Republican former President Donald Trump.
The survey results were included as part of the Fed's latest Financial Stability Report, which looks at issues like leverage and risk-taking throughout the economy to try to identify potential trouble spots.
The report was released more than two years after the Fed launched the most aggressive interest rate hiking cycle since the 1980s in a bid to slow a surge in inflation, a move that was broadly predicted to tip the economy into recession and aggravate stresses in the financial sector.
But the latest report, much like those preceding it through the Fed's battle with inflation, shows little evidence of widespread risks to the financial system despite borrowing costs remaining at their highest levels in a quarter of a century.
But that overall impression of resilience also suggests potential problems for Fed officials who feel the economy needs to slow in order for inflation to sustainably return to the central bank's 2% target.
The strength of household and business balance sheets, the stability of the banks, and the lack of imminent bubbles or other threats suggest that a slowdown won't come through financial or credit channels that have typically been an important part of monetary policy transmission.
Contacts were interviewed through March, when Fed officials began to have doubts about an ongoing drop in inflation and noted that rate cuts might not come as fast as expected.
While that added to uncertainty about monetary policy, which along with inflation was the most cited risk, the level of "policy uncertainty" flowing from the escalation of violence in Israel and throughout the Middle East, the ongoing war in Ukraine, and the state of U.S. politics, was the second-most cited threat to the financial system.
Across what has become the Fed's standard framework for assessing financial vulnerabilities, however, the system was characterized as in largely steady shape despite high policy interest rates and the ongoing inflation fight.
There were some areas of concern, including declining values for commercial real estate and rising leverage among some of the bigger hedge funds.
Asset values, including stocks and real estate, were high.
But private debt as a share of national economic output declined, businesses maintained a "robust" capacity to service debt, and household debt was "modest."
"The banking system remained sound and resilient," with strong capital and liquidity levels, the Fed said in the report.
Reporting by Howard Schneider; Editing by Paul Simao
https://www.reuters.com/markets/us/fed- ... 024-04-19/
"Fed report cites inflation, US election as key financial stability risks"
By Howard Schneider and Pete Schroeder
April 19, 2024
WASHINGTON, April 19 (Reuters) - Persistent inflation and higher-for-longer interest rates were cited as key risks to financial stability in the Federal Reserve's latest survey of U.S. central bank contacts, with geopolitical troubles and the 2024 U.S. presidential election also mentioned as "a potentially significant source of shocks."
"Contacts noted several areas of uncertainty including trade policy and other foreign policy issues related to escalating geopolitical tensions," the Fed said on Friday in its semi-annual survey of 25 market participants, academics and other contacts.
"They also noted policy uncertainty associated with the U.S. elections in November," when the Democratic incumbent Joe Biden faces Republican former President Donald Trump.
The survey results were included as part of the Fed's latest Financial Stability Report, which looks at issues like leverage and risk-taking throughout the economy to try to identify potential trouble spots.
The report was released more than two years after the Fed launched the most aggressive interest rate hiking cycle since the 1980s in a bid to slow a surge in inflation, a move that was broadly predicted to tip the economy into recession and aggravate stresses in the financial sector.
But the latest report, much like those preceding it through the Fed's battle with inflation, shows little evidence of widespread risks to the financial system despite borrowing costs remaining at their highest levels in a quarter of a century.
But that overall impression of resilience also suggests potential problems for Fed officials who feel the economy needs to slow in order for inflation to sustainably return to the central bank's 2% target.
The strength of household and business balance sheets, the stability of the banks, and the lack of imminent bubbles or other threats suggest that a slowdown won't come through financial or credit channels that have typically been an important part of monetary policy transmission.
Contacts were interviewed through March, when Fed officials began to have doubts about an ongoing drop in inflation and noted that rate cuts might not come as fast as expected.
While that added to uncertainty about monetary policy, which along with inflation was the most cited risk, the level of "policy uncertainty" flowing from the escalation of violence in Israel and throughout the Middle East, the ongoing war in Ukraine, and the state of U.S. politics, was the second-most cited threat to the financial system.
Across what has become the Fed's standard framework for assessing financial vulnerabilities, however, the system was characterized as in largely steady shape despite high policy interest rates and the ongoing inflation fight.
There were some areas of concern, including declining values for commercial real estate and rising leverage among some of the bigger hedge funds.
Asset values, including stocks and real estate, were high.
But private debt as a share of national economic output declined, businesses maintained a "robust" capacity to service debt, and household debt was "modest."
"The banking system remained sound and resilient," with strong capital and liquidity levels, the Fed said in the report.
Reporting by Howard Schneider; Editing by Paul Simao
https://www.reuters.com/markets/us/fed- ... 024-04-19/