Inflation, Sharp Rise in Interest Rates Pose Financial Risks, Fed Says

Elevated and persistent inflation, coupled with a sharp rise in interest rates, are among the greatest near-term risks to the U.S. economic system, the Federal Reserve said Monday, while warning that Russia’s invasion of Ukraine could also affect financial stability.

“Further adverse surprises in inflation and interest rates, particularly if accompanied by a decline in economic activity, could negatively affect the financial system,” the central bank said in its latest semiannual Financial Stability Report.

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