By KEN SWEET
AP Business Writer
NEW YORK (AP) — The Federal Reserve said Monday that Russia’s war in Ukraine and surging inflation are now the greatest threats facing the global economy, supplanting the coronavirus pandemic.
The observations came in the Fed’s semiannual Financial Stability Report that looks at trends in trading and investing as well as broad economic issues. The report is not an economic forecast, and does not try to predict the next risk to the financial system. But it does attempt to highlight areas of concern to central bankers.
The Fed said economic uncertainty has increased since the bank’s previous report, with Ukraine war being a big part of the deterioration. The bank also highlighted the large fluctuations in asset prices — from Treasuries to stocks — as investors reevaluate risk in a high-inflation environment.
“Inflation has been higher and more persistent than expected, even before the invasion of Ukraine, and uncertainty over the inflation outlook poses risks to financial conditions and economic activity,” the Fed said in its report.
Because the report reflects the Fed’s thinking, its conclusions could be part of the backdrop when the central bank conducts its annual stress tests of the nation’s biggest banks in the coming weeks. The Fed used previous reports to highlight the pandemic as well as last year’s interest in “meme” stocks such as GameStop and AMC Entertainment.
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