Fed Warns of Significant Financial-Sector Vulnerabilities

(Bloomberg) — The Federal Reserve put a spotlight on job losses and risks to the financial sector in its semi-annual report to Congress released Friday.

“Despite increased resilience from the financial and regulatory reforms adopted since 2008, financial system vulnerabilities — most notably those associated with liquidity and maturity transformation in the nonbank financial sector — have amplified some of the economic effects of the pandemic,” the Fed said. “Accordingly, financial-sector vulnerabilities are expected to be significant in the near term.

”The central bank also highlighted the risks to the economy and job losses, with a section dedicated to the topic.

The Fed’s policy committee this week voted to keep interest rates near zero and central bankers penciled in no rate hikes through 2022. In their first forecasts since December, Federal Open Market Committee participants projected an unemployment rate of 9.3% at year’s end, edging down slowly over the next two years, with inflation below the Fed’s 2% target through 2022 amid weak demand.

Source: Fed Warns of Significant Financial-Sector Vulnerabilities


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