Fed Says Risks to U.S. Financial System Have Lessened Compared to Last Year

The Federal Reserve said in its latest financial market report that risks to the U.S. financial system are significantly less than last year.

In its semiannual Financial Stability Report, the Fed noted that finances of American households and businesses have started to strengthen along with economic recovery.

Borrowing by households and businesses are trending back to pre-pandemic levels — with the help of lower interest rates imposed during the pandemic — and banks are recording more profits than last year, the Fed noted.

However, a significant rise in asset prices poses some vulnerabilities in the financial system. Home prices have outstripped rent at all-time highs, although the Fed said that there are no signs of bad credit quality that could cause a crisis similar to that in 2008.

Increased volatile trading in “meme” stocks has posed risks as well. A new meme coin called “Shiba Inu“, inspired by the same online joke that created Dogecoin, surpassed the market capitalization of two European banking giants last month after its price rose 50 percent in just 24 hours.

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