Federal Reserve Financial Stability Report Warns of Worsening Liquidity

In its semi-annual report, published May 5, the Federal Reserve took a cautionary tone in describing the dramatic changes since its last report in November 2021, citing human and economic hardship due to the Russian invasion of Ukraine, the spread of the COVID Omicron variant and inflation that has been higher and longer than anticipated as elements of the vulnerabilities of the U.S. financial system. The report found vulnerabilities in asset valuations, particularly in housing prices, and in business borrowing and leverage in the financial sector which going forward could “negatively affect domestic economic activity, asset prices, credit quality, and financial conditions more generally.”  Read more.