Rising tension in the Middle East poses a greater near-term risk to the US financial system than persistent inflation and high interest rates, a survey released on Friday by the Federal Reserve showed.
According to the Fed's financial stability report, 46 per cent of contacts cited Middle East tension as a salient risk to the financial system, compared to 33 per cent for inflation and monetary tightening.
The financial stability report is a biannual survey released by the Fed to assess the resilience of the US financial system. Friday's report showed a 14 per cent increase in those who considered Middle East tension to be a risk. Those who viewed inflation as a risk, meanwhile, fell from 72 per cent to 33 per cent.
Fiscal debt sustainability topped the potential risks to the financial system, with 54 per cent of respondents considering it a near-term risk.
“Respondents noted the most immediate risk in Middle East tensions would be a widening of the conflict within the region, with some highlighting a tail risk that it could become a global conflict,” the report said.
The survey said the main channels affecting financial stability would be disruptions to energy supplies and broader commodity markets.
Geopolitical risks have often featured in the rate-setting Federal Open Market Committee's discussions since the onsets of the war in Ukraine in 2022 and in the Middle East last year, according to minutes released by the central bank.
“Further escalation of geopolitical tensions could reduce economic activity, boost inflation, and heighten volatility in global financial markets,” the report said.
The report added that a combination of high asset valuation pressures, along with rising geopolitical and policy uncertainty, “increases the risk of a sudden pullback from risk-taking”. Such a scenario could lower asset prices, leaving US businesses and investors exposed to risks.
Fed Chair Jerome Powell pointed to elevated geopolitical risks as potential “black clouds” that the central bank is watching with respect to the economic outlook. While he noted the conflicts have had little impact on the economy so far, he said this could change depending on things such as oil prices.
The price of oil has been relatively stable after spiking earlier this year. The price of Brent crude oil closed Friday at $71.20 per barrel on Friday while West Texas Intermediate crude oil was at $71.16 per barrel.
Meanwhile, the US economy keeps humming. Backed by robust consumer spending, the nation's economy grew by 2.8 per cent last quarter. At the same time, the unemployment rate remains a low 4.1 per cent while inflation ticks closer down to the Fed's 2 per cent goal.
Those developments have brought increased expectations that the economy can achieve a soft-landing scenario. The Fed, which has lowered interest rates by 75 basis points since September, will determine in December if it needs to reduce policy again.
The positive inflation outlook was reflected in Friday's survey.
The number of those who believed persistent inflation and monetary tightening fell by 59 per cent. At the same time, 38 per cent consider a recession to remain a risk, pointing to some uncertainty in the outlook.
Respondents were also increasingly concerned about the potential of a global trade war, “noting the potential for tariff barriers to prompt retaliatory protectionist policies that would negatively affect global trade flows and put renewed upwards pressure on inflation”.
Those concerns have spilt over into the Treasury market, with yields on the 10-year Treasury rising despite the Fed's rate cuts.
The report found that asset valuation pressures remain elevated, while vulnerabilities from household and business debt is moderated. Still, the Fed noted delinquencies on credit cards and auto loans are above pre-pandemic loans.
Meanwhile, the banking system remains resilient and funding risks remain "notable" despite decreasing somewhat.
Bookshops: A Reader's History by Jorge Carrión (translated from the Spanish by Peter Bush),
Biblioasis
SPECS%3A%20Polestar%203
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Copa del Rey
Barcelona v Real Madrid
Semi-final, first leg
Wednesday (midnight UAE)
Results for Stage 2
Stage 2 Yas Island to Abu Dhabi, 184 km, Road race
Overall leader: Primoz Roglic SLO (Team Jumbo - Visma)
Stage winners: 1. Fernando Gaviria COL (UAE Team Emirates) 2. Elia Viviani ITA (Deceuninck - Quick-Step) 3. Caleb Ewan AUS (Lotto - Soudal)
Batti Gul Meter Chalu
Producers: KRTI Productions, T-Series
Director: Sree Narayan Singh
Cast: Shahid Kapoor, Shraddha Kapoor, Divyenndu Sharma, Yami Gautam
Rating: 2/5
Islamophobia definition
A widely accepted definition was made by the All Party Parliamentary Group on British Muslims in 2019: “Islamophobia is rooted in racism and is a type of racism that targets expressions of Muslimness or perceived Muslimness.” It further defines it as “inciting hatred or violence against Muslims”.
Boulder shooting victims
• Denny Strong, 20
• Neven Stanisic, 23
• Rikki Olds, 25
• Tralona Bartkowiak, 49
• Suzanne Fountain, 59
• Teri Leiker, 51
• Eric Talley, 51
• Kevin Mahoney, 61
• Lynn Murray, 62
• Jody Waters, 65
World record transfers
1. Kylian Mbappe - to Real Madrid in 2017/18 - €180 million (Dh770.4m - if a deal goes through)
2. Paul Pogba - to Manchester United in 2016/17 - €105m
3. Gareth Bale - to Real Madrid in 2013/14 - €101m
4. Cristiano Ronaldo - to Real Madrid in 2009/10 - €94m
5. Gonzalo Higuain - to Juventus in 2016/17 - €90m
6. Neymar - to Barcelona in 2013/14 - €88.2m
7. Romelu Lukaku - to Manchester United in 2017/18 - €84.7m
8. Luis Suarez - to Barcelona in 2014/15 - €81.72m
9. Angel di Maria - to Manchester United in 2014/15 - €75m
10. James Rodriguez - to Real Madrid in 2014/15 - €75m
More on animal trafficking
More coverage from the Future Forum
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Company Profile
Name: Thndr
Started: 2019
Co-founders: Ahmad Hammouda and Seif Amr
Sector: FinTech
Headquarters: Egypt
UAE base: Hub71, Abu Dhabi
Current number of staff: More than 150
Funds raised: $22 million
FIXTURES
All kick-off times 10.45pm UAE ( 4 GMT)
Tuesday
Mairobr v Liverpool
Spartak Moscow v Sevilla
Feyenoord v Shakhtar Donetsk
Manchester City v Napoli
Monaco v Besiktas
RB Leipzig v Porto
Apoel Nicosia v Borussia Dortmund
Real Madrid v Tottenham Hotspur
Wednesday
Benfica v Manchester United
CSKA Moscow v Basel
Bayern Munich v Celtic
Anderlecht v Paris Saint-Germain
Qarabag v Atletico Madrid
Chelsea v Roma
Barcelona v Olympiakos
Juventus v Sporting Lisbon
NEW ARRIVALS
Benjamin Mendy (Monaco) - £51.75m (Dh247.94m)
Kyle Walker (Tottenham Hotspur) - £45.9m
Bernardo Silva (Monaco) - £45m
Ederson Moraes (Benfica) - £36m
Danilo (Real Madrid) - £27m
Douglas Luiz (Vasco de Gama) - £10.8m
Guns N’ Roses’s last gig before Abu Dhabi was in Hong Kong on November 21. We were there – and here’s what they played, and in what order. You were warned.
- It’s So Easy
- Mr Brownstone
- Chinese Democracy
- Welcome to the Jungle
- Double Talkin’ Jive
- Better
- Estranged
- Live and Let Die (Wings cover)
- Slither (Velvet Revolver cover)
- Rocket Queen
- You Could Be Mine
- Shadow of Your Love
- Attitude (Misfits cover)
- Civil War
- Coma
- Love Theme from The Godfather (movie cover)
- Sweet Child O’ Mine
- Wichita Lineman (Jimmy Webb cover)
- Wish You Were Here (instrumental Pink Floyd cover)
- November Rain
- Black Hole Sun (Soundgarden cover)
- Knockin’ on Heaven’s Door (Bob Dylan cover)
- Nightrain
Encore:
- Patience
- Don’t Cry
- The Seeker (The Who cover)
- Paradise City
Key fixtures from January 5-7
Watford v Bristol City
Liverpool v Everton
Brighton v Crystal Palace
Bournemouth v AFC Fylde or Wigan
Coventry v Stoke City
Nottingham Forest v Arsenal
Manchester United v Derby
Forest Green or Exeter v West Brom
Tottenham v AFC Wimbledon
Fleetwood or Hereford v Leicester City
Manchester City v Burnley
Shrewsbury v West Ham United
Wolves v Swansea City
Newcastle United v Luton Town
Fulham v Southampton
Norwich City v Chelsea
Uefa Champions League play-off
First leg: Wednesday, 11pm (UAE)
Ajax v Dynamo Kiev
Second leg: Tuesday, August 28, 11pm (UAE)
Dynamo Kiev v Ajax
MATCH INFO
Quarter-finals
Saturday (all times UAE)
England v Australia, 11.15am
New Zealand v Ireland, 2.15pm
Sunday
Wales v France, 11.15am
Japan v South Africa, 2.15pm
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%3Cp%3E%3Cstrong%3EDirector%3A%3C%2Fstrong%3E%20Ric%20Roman%20Waugh%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStars%3A%C2%A0%3C%2Fstrong%3EGerard%20Butler%2C%20Navid%20Negahban%2C%20Ali%20Fazal%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%3C%2Fstrong%3E%202.5%2F5%3C%2Fp%3E%0A
