Inflation, Ukraine and China, risks for financial stability in the United States, worries the Fed

The risks for financial stability in the United States have increased over the past six months, the American central bank (Fed) warned on Monday May 9 in a report, citing inflation, the war in Ukraine or the difficulties of the real estate sector. in China.

Tensions in Europe related to the Russian invasion of Ukraine or in emerging markets, or which could originate in China or be fueled by inflationary pressures, could spill over to the United States“, underlines the Federal Reserve (Fed) in its semi-annual financial stability report. “In addition, high inflation and rising interest rates in the United States could adversely affect domestic economic activity, asset prices, credit quality and financial conditions more generally.“, it is specified.

Reliable credits

Loans granted to households and businesses remain reliable, notes the institution, and payment delays and defaults are at their lowest for 20 years. But “rising inflation, supply chain disruptions and ongoing geopolitical events could pose risks to the ability of some businesses and households to service their debts“.

The previous financial stability report was published in November 2021, and since then “uncertainty has grown over the economic outlook“says the Fed. The institution then pointed to the risks to global growth posed by the difficulties of the real estate sector in China, weighed down by the setbacks of the giant Evergrande.

Six months later, the danger persists, warns the Fed, which reports that “in China, debt levels are high in the real estate sector, where activity and prices fell sharply last year“. “If this slowdown intensifies, its effects (…) could be amplified by lockdowns or other disruptions to the economy due to new surges in Covid-19 cases, new regulatory restrictions (including new measures to rein in the tech sector), or any decline in trade or investment from other countries for geopolitical reasons“, warns the central bank. These tensionscould put a strain on global financial markets (…), potentially affecting the United States», Still notes the Fed.

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