The Federal Reserve's own economists are most worried about banking stress, stubborn inflation and commercial real estate right now,The central bank released its periodic Financial Stability Report on Monday, which presents the monetary authority's current assessment of stability in the US financial system. The last time it published such a report was in November 2022, before the implosion of Silicon Valley Bank unleashed chaos across the banking system.
"Frequently cited topics in this survey included persistent inflation and tighter monetary policy, banking-sector stress, commercial and residential real estate and geopolitical tensions," the report said. "Concerns about the economic outlook, credit quality, and funding liquidity could lead banks and other financial institutions to further contract the supply of credit to the economy," the Fed said in its report.
"A sharp contraction in the availability of credit would drive up the cost of funding for businesses and households, potentially resulting in a slowdown in economic activity," it added. Credit contraction fears have taken hold following the collapse of Silicon Valley Bank, Signature Bank, and First Republic Bank, with Morgan Stanley's top stock strategist Mike Wilson claiming that a credit crunch has