The US government’s debt load is now seen as the biggest risk to financial stability, outweighing persistent inflation in a Federal Reserve survey.
“Concerns surrounding US fiscal debt sustainability were atop the list this survey, followed by escalating tensions in the Middle East and policy uncertainty,” the Fed said in its semi-annual financial stability report. The survey was conducted from late August to late October by New York Fed staff.
In addition to the results of the survey of financial-market contacts, the report includes the central bank’s assessment of developing risks in four main areas, including asset valuations, borrowing by businesses and households, leverage in the financial sector and funding risks.
While the banking sector remained “sound and resilient overall,” the report said leverage across hedge funds was at or near the highest level observed since data became available in…
