Fed sees steady economy, only ‘moderate’ financial vulnerabilities
The US economy continues to create jobs and grow at a pace, consumer confidence and constant investment both healthy and only moderate risk signals in financial markets, said the US Federal Reserve on Friday in its biannual report To Congress.
With the stock market near historical highs, interest rates and credit conditions remain slack, the report pays special attention to the question of whether the financial system and bond markets posed a particular threat to economic expansion eight Years in the country.
The response so far is not, the Fed said, noting that there is little evidence of a liquidity crisis in the commercial or bond markets, and there is no evidence that the asset’s highest asset values.
The structure of the corporate bond market is evolving with new regulations, the Fed said, but by traditional measures, there is only minimal restriction adjustment.
“The vulnerabilities of the US financial system remained in balance, moderate,” the report concluded, presented to Congress on behalf of the Fed’s Board of Governors in Washington.
“Valuation pressures on a number of assets and several indicators of investors’ risk appetite increased again … However, these developments in asset markets have not been matched by an impact of greater influence.”
The combination of the increase in the value of assets and the increase in leverage is considered particularly toxic, indicating that investments are made in the loan, leaving investors unable to repay these debts if the value of the underlying asset decreases .
Bond yields in the US Rose after the report, yielding the benchmark 10-year note near a peak of more than eight weeks. US stocks rose higher.
The release of the report on Friday is ahead of the speech of Fed Chairman Janet Yellen on Wednesday and Thursday before the House and Senate committees overseeing the central bank and related issues. The 60-page document is largely a review of economic and political developments since the last report in February.
In this case, the document adopted a constant quality. Growth in the first quarter was slow to around 1-1 / 2 percent on an annual basis, and inflation was reduced.
However, consumer confidence remained strong and “business investment has manifested itself … The housing market continues its gradual recovery. Economic growth was also supported by the recent strength of overseas business.”
The government announced on Friday that non-farm payrolls rose by 222,000 in June and that workers have more hours, but average hourly earnings rose 0.2%.
Along with the discussion on financial terms, the Fed highlighted some long-term problems. The central bank noted that the growth of low productivity could become a “new normal” and could be a reason that wage growth remains low.