Fed warns sharply higher interest rates could spark financial distress
The US Federal Reserve warned of the potential for financial distress that damages the economy if interest rates rise to levels higher than expected, in a report that underscored the stakes of its drive to control stubborn inflation.
The central bank’s latest report on financial stability published on Friday highlighted a constellation of risks including a weaker global economy, “unacceptably high” inflation, and geopolitical turmoil. These currents have magnified volatility in some asset classes.
The report arrived two days after the Fed raised benchmark interest rates by 0.75 percentage points for the fourth time in a row, bringing them to a new target range of 3.75 per cent to 4 per cent. As recently as March, rates hovered near zero. The Bank of England also raised rates by 0.75 percentage points on Thursday, with the European Central Bank also opting for a jumbo rate rise last week.
This story originally appeared on: Financial Times - Author:Eric Platt
