Fed Report: Policy Uncertainty Poses Risks to Financial Stability

Fed's Financial Stability Report for November

The Federal Reserve (Fed) has published its Financial Stability Report for November. The report contains significant assessments regarding the current state of the U.S. financial system and the potential risks it faces.

Policy Uncertainty Comes to the Fore

The published report emphasizes that policy uncertainty is the greatest threat to financial stability. In the survey results of the report, participants highlighted their concerns regarding trade policy, the independence of the central bank, and the reliability of economic data.

Geopolitical Risks and Interest Rates

Following policy uncertainty, other risks include geopolitical tensions, the rise in long-term interest rates, ongoing inflationary pressures, and changes in perceptions related to artificial intelligence. The potential sharp declines in asset prices resulting from these factors could tighten financial conditions.

The Impact of Artificial Intelligence on Stocks

The Fed's report also draws attention to the role of artificial intelligence in recent stock performance. It is stated that changes in perceptions of artificial intelligence could trigger a correction in risky assets, which could lead to significant losses in both private and public markets.

If these declines are substantial enough, there may be further slowdown in the labor market and tightening of the financial situation. All these developments stand out as important elements that investors should closely monitor.