Even as global central banks rapidly tightened financial conditions this year, US households, banks and businesses have so far been able to adapt, US Federal Reserve vice chair Lael Brainard said as the authority released its semi-annual report on financial stability.
"Over the period, household and business indebtedness has remained generally stable, and on aggregate households and businesses have maintained the ability to cover debt servicing, despite rising interest rates," Ms Brainard said on Friday.
In comments released along with the report, she restated concerns that the "rapid synchronous global monetary policy tightening", along with surging inflation, the continuing war in Ukraine and other risks, "could lead to the amplification of vulnerabilities, for instance due to strained liquidity in core financial markets or hidden leverage".
The turbulent state of the world was captured in a survey of researchers and market participants who flagged an array of emerging concerns associated with the changes both in market conditions over the past year, and the worsening geopolitical situation.
More than half of those participating in the survey said market liquidity and stress were a "salient risk", an issue not mentioned at all in the Fed's May financial stability report. Concern over Ukraine, inflation and oil prices remained high, but added to that is rising tension between China and Taiwan, cited by 42 per cent of survey respondents.
Overall, however, the document described an economy adjusting, if sometimes fitfully, to the Fed's rate hikes.
Banks maintained adequate capital, and while equity prices fell the report noted that real estate prices had largely held up.
"On balance, vulnerabilities arising from borrowing by non-financial businesses and households were little changed over the first half of 2022 and remained at moderate levels," the report said.
"Borrowing by businesses remained at high levels relative to gross domestic product in the first half of 2022, but some measures of their ability to service that debt improved as the effects of rising interest rates were offset by higher business earnings."
The report noted deteriorating liquidity in the Treasury market, but said that overall it had functioned smoothly over the last few months.
"The likely predominant driver of recent low liquidity appears to be elevated uncertainty about the economic situation and the outlook for monetary policy," the report concluded.
Liquidity conditions were particularly poor for older vintages of bonds — so-called "off the run" securities — and for Treasury Inflation Protected Securities, the report found. "That said, market participants are not reporting major problems obtaining quotes or executing trades."
The Inter-Agency Working Group on Treasury Market Surveillance — comprising officials from the Fed Board, Treasury, New York Fed, Securities and Exchange Commission and Commodity Futures Trading Commission — is expected to provide an update on its progress towards enhancing the resilience of the Treasury market, the Fed said, though it did not provide a timeline for that.
The report also took note of the weakening economic conditions abroad from the war in Ukraine, China's continuing "zero-Covid" policy and its problematic property market, as well as persistent inflation, that could foster negative spillovers back to the US economy or financial system in certain circumstances.
"Lower growth trajectories and rapidly rising interest rates as central banks respond to inflation have led to bouts of market volatility, and the dollar has appreciated significantly against most foreign currencies," the report said.
Lower growth trajectories and rapidly rising interest rates as central banks respond to inflation have led to bouts of market volatility, and the dollar has appreciated significantly against most foreign currencies
US Federal Reserve
During the long period of low and stable interest rates, some financial institutions increased their use of leverage and derivatives, putting them at risk of facing strains with rates now rising rapidly and volatility on the rise, the report said.
The Fed nodded to the recent market upheaval in the UK, where in September a sharp rise in government yields forced pension funds that had taken on leveraged interest-rate positions to liquidate assets to meet margin calls, pushing yields up further.
"This adverse feedback loop prompted the Bank of England to introduce a temporary bond purchase programme to improve market functioning," the report said. "More broadly, periods of market volatility may raise concerns about funding pressures for some financial institutions."
"Modern financial markets are interconnected, so stresses abroad could lead to strains in US markets and challenges for US financial institutions."
UAE currency: the story behind the money in your pockets
Water waste
In the UAE’s arid climate, small shrubs, bushes and flower beds usually require about six litres of water per square metre, daily. That increases to 12 litres per square metre a day for small trees, and 300 litres for palm trees.
Horticulturists suggest the best time for watering is before 8am or after 6pm, when water won't be dried up by the sun.
A global report published by the Water Resources Institute in August, ranked the UAE 10th out of 164 nations where water supplies are most stretched.
The Emirates is the world’s third largest per capita water consumer after the US and Canada.
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Company profile
Name: Back to Games and Boardgame Space
Started: Back to Games (2015); Boardgame Space (Mark Azzam became co-founder in 2017)
Founder: Back to Games (Mr Azzam); Boardgame Space (Mr Azzam and Feras Al Bastaki)
Based: Dubai and Abu Dhabi
Industry: Back to Games (retail); Boardgame Space (wholesale and distribution)
Funding: Back to Games: self-funded by Mr Azzam with Dh1.3 million; Mr Azzam invested Dh250,000 in Boardgame Space
Growth: Back to Games: from 300 products in 2015 to 7,000 in 2019; Boardgame Space: from 34 games in 2017 to 3,500 in 2019
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Artist: Coldplay
Label: Parlophone/Atlantic
Number of tracks: 10
Rating: 3/5
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FIVE%20TRENDS%20THAT%20WILL%20SHAPE%20UAE%20BANKING
%3Cp%3E%E2%80%A2%20The%20digitisation%20of%20financial%20services%20will%20continue%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Managing%20and%20using%20data%20effectively%20will%20become%20a%20competitive%20advantage%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Digitisation%20will%20require%20continued%20adjustment%20of%20operating%20models%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Banks%20will%20expand%20their%20role%20in%20the%20customer%20life%20through%20ecosystems%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20The%20structure%20of%20the%20sector%20will%20change%3C%2Fp%3E%0A
IPL 2018 FINAL
Sunrisers Hyderabad 178-6 (20 ovs)
Chennai Super Kings 181-2 (18.3 ovs)
Chennai win by eight wickets
Padmaavat
Director: Sanjay Leela Bhansali
Starring: Ranveer Singh, Deepika Padukone, Shahid Kapoor, Jim Sarbh
3.5/5
Boulder shooting victims
• Denny Strong, 20
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• Rikki Olds, 25
• Tralona Bartkowiak, 49
• Suzanne Fountain, 59
• Teri Leiker, 51
• Eric Talley, 51
• Kevin Mahoney, 61
• Lynn Murray, 62
• Jody Waters, 65
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
%3Cp%3E%3Cstrong%3EEngine%3A%20%3C%2Fstrong%3E4-litre%20twin-turbo%20V8%0D%3Cbr%3E%3Cstrong%3ETransmission%3A%3C%2Fstrong%3E%208-speed%20auto%0D%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E470hp%2C%20338kW%0D%3Cbr%3E%3Cstrong%3ETorque%3A%3C%2Fstrong%3E%20620Nm%0D%3Cbr%3E%3Cstrong%3EPrice%3A%3C%2Fstrong%3E%20From%20Dh491%2C500%20(estimate)%0D%3Cbr%3E%3Cstrong%3EOn%20sale%3A%20%3C%2Fstrong%3Enow%3C%2Fp%3E%0A
The%20Specs%20
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Race card
1.45pm: Maiden Dh75,000 1,200m.
2.15pm: Maiden Dh75,000 1,200m.
2.45pm: Handicap Dh95,000 1,200m.
3.15pm: Handicap Dh120,000 1,400m.
3.45pm: Handicap Dh80,000 1,400m.
4.15pm: Handicap Dh90,000 1,800m.
4.45pm: Handicap Dh80,000 1,950m.
The National selections:
1.45pm: Galaxy Road – So Hi Speed
2.15pm: Majestic Thunder – Daltrey
2.45pm: Call To War – Taamol
3.15pm: Eqtiraan - Bochart
3.45pm: Kidd Malibu – Initial
4.15pm: Arroway – Arch Gold
4.35pm: Compliance - Muqaatil
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Publisher: EA Sports
Consoles: PC, PlayStation 4/5, Xbox Series X/S
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Friday, Sept 26 – UAE won by 36 runs
Sunday, Sept 28 – Second ODI
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Tearful appearance
Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday.
Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow.
She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.
A spokesman said her upset demeanour was due to a personal matter.
Mohammed bin Zayed Majlis
Mohammed bin Zayed Majlis
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Saturday's schedule at the Abu Dhabi Grand Prix
GP3 race, 12:30pm
Formula 1 final practice, 2pm
Formula 1 qualifying, 5pm
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