The Federal Reserve's bi-annual survey, published on Friday, revealed escalating concerns about persistent inflation and potential real estate losses. This sentiment was shared by 75% of respondents, marking a significant increase from the previous figure of 50%.

The survey also flagged risks associated with the resurgence of stress in the banking sector and China's economic weakness. Despite the overall resilience of the banking sector, some institutions are dealing with considerable losses. These losses are attributed to rising interest rates impacting longer-maturity, fixed-rate assets, and worries over uninsured deposits.

In relation to household debt, which is mainly held by individuals with strong credit histories or significant home equity, the survey noted that it remains modest relative to GDP. However, high property prices continue to persist when compared to fundamentals.

The report also pointed out ongoing structural vulnerabilities in money market funds, stablecoins, and other funds. Life insurers were noted as maintaining a heavy reliance on runnable liabilities.

The survey's findings underscore the Federal Reserve's focus on monitoring these potential risks to financial stability. As inflation continues to be a key concern among economists and policymakers worldwide, the central bank's observations and responses will be closely watched in the coming months.

Source : Investing.com / October 20, 2023