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Growth of Nonbanks is Revealing New Financial Stability Risks
Stretched asset valuations and pressures in core sovereign bond markets are keeping financial stability risks elevated amid heightened economic uncertainty. These vulnerabilities could be amplified by the growth of nonbank financial institutions—through their growing importance as market makers, liquidity providers and intermediaries in private credit, real estate, and crypto markets. As we detail in our new Global Financial Stability Report, stress testing shows that the vulnerabilities of these nonbank intermediaries can quickly transmit to the core banking system, amplifying shocks, and complicating crisis ... (full story)
Added at 9:18am
- GROUP SAYS IN SEMIANNUAL GLOBAL FINANCIAL STABILITY REPORT THAT RISKS REMAIN ELEVATED
IMF SAYS RISK ASSET PRICES ARE WELL ABOVE FUNDAMENTALS, INCREASING ODDS OF 'DISORDERLY' CORRECTION
IMF WARNS OF 'COMPLACENT' MARKETS IN FACE OF GEOPOLITICAL, ECONOMIC AND FINANCIAL RISKS
IMF WARNS OF GROWING NONBANK FINANCIAL SECTOR, WHICH COULD WEIGH ON BANK CAPITAL IN DOWNTURN
GROWING GOVERNMENT DEBT ISSUE ALSO FLAGGED AS CONCERN BY IMF, AS POTENTIAL YIELD SPIKES COULD UPEND MARKETS
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In April, the United States shook global trade norms by announcing sweeping tariffs. Given the complexity and fluidity of the moment, our April report offered a range of estimates for the growth downgrade, from modest to significant, depending on the ultimate severity of the trade shock. Six months on, where are we? The good news is that the growth downgrade is at the modest end of the range. The reasons are clear. The United States negotiated trade deals with various countries and provided multiple exemptions. Most countries refrained from retaliation, keeping instead the trading system largely open. The private sector also proved agile, front-loading imports and speedily re-routing supply chains. As a result, the increase in tariffs and its effect has been smaller than expected so far. We now project global growth at 3.2 percent this year and 3.1 percent next year, a cumulative downgrade of 0.2 percentage point since our forecast a year earlier. IMF forecasts global headline inflation to decline to 4.2% in 2025 and 3.7% in 2026, from 5.8% in 2024. IMF Predicts U.S. Economy Growth To Be 2.0% In 2025, Slightly Up From 1.9% In July, And 2.1% In 2026, Slightly Higher Than 2.0%; 2024 Growth Was 2.8% IMF predicts China will grow by 4.8% in 2025 and 4.2% in 2026, same as July forecasts, citing weak demand and a fragile property sector. IMF Forecasts 2025 Global Real GDP Growth At 3.2% Vs 3.0% In July Due To Less-Severe Trade Shocks, Easier Financial Conditions Than Expected - 2026 Global Growth At 3.1%, Flat With July Forecast; 2024 Growth Was 3.3% -World Economic Outlook
FED’S POWELL: DATA BEFORE U.S. GOVERNMENT SHUTDOWN SUGGESTED GROWTH MAY BE BETTER THAN EXPECTED 
Understanding the Fed’s Balance Sheet Thank you, Emily. And thank you to the National Association for Business Economics for the Adam Smith Award. It is an honor just to be mentioned alongside past recipients, including my predecessors Janet Yellen and Ben Bernanke. Thank you for this recognition and for the opportunity to speak with you today. Monetary policy is more effective when the public understands what the Federal Reserve does and why. With that in mind, I hope to enhance understanding of one of the more arcane and technical aspects of monetary policy: the Federal Reserve's balance sheet. A colleague recently compared this topic to a trip to the dentist, but that comparison may be unfair—to dentists.1 Today, I will discuss the essential role our balance sheet played during the pandemic, along with some lessons learned. I will then review our ample reserves implementation framework and the progress we have made toward normalizing the size of our balance sheet. I will conclude with some brief remarks on the economic outlook. One of the primary purposes of a central bank is to provide the monetary foundation for the financial system and the broader economy. This foundation is made of central bank liabilities. On the Fed's balance sheet, the liability side of the ledger totaled $6.5 trillion as of October 8, and three categories account for roughly 95 percent of that total.2 First, Federal Reserve notes—that is, physical currency—totaled $2.4 trillion. Second, reserves—funds held by depository institutions at the Federal Reserve Banks—totaled $3.0 trillion. These deposits allow commercial banks to make and receive payments and meet regulatory requirements. Reserves are the safest and most liquid asset in the financial system, and only the Fed can create them. The adequate provision of reserves is essential to the safety and soundness of our banking system, the resilience and efficiency of our payments system, and ultimately the stability of our economy. FED’S POWELL: AVAILABLE DATA SHOW TARIFFS PUSHING UP PRICE PRESSURES FED’S POWELL: U.S. CENTRAL BANK HAS OTHER DATA BEYOND GOVERNMENT SOURCES TO USE FED’S POWELL: CURRENT FED POLICY TOOLKIT WORKING VERY WELL POWELL: OUTLOOK HASN’T CHANGED MUCH SINCE SEPTEMBER FED MEETING FED’S POWELL: MAY BE APPROACHING END OF BALANCE SHEET CONTRACTION ‘IN COMING MONTHS’
Understanding the Fed’s Balance Sheet Thank you, Emily. And thank you to the National Association for Business Economics for the Adam Smith Award. It is an honor just to be mentioned alongside past recipients, including my predecessors Janet Yellen and Ben Bernanke. Thank you for this recognition and for the opportunity to speak with you today. Monetary policy is more effective when the public understands what the Federal Reserve does and why. With that in mind, I hope to enhance understanding of one of the more arcane and technical aspects of monetary policy: the Federal Reserve's balance sheet. A colleague recently compared this topic to a trip to the dentist, but that comparison may be unfair—to dentists.1 Today, I will discuss the essential role our balance sheet played during the pandemic, along with some lessons learned. I will then review our ample reserves implementation framework and the progress we have made toward normalizing the size of our balance sheet. I will conclude with some brief remarks on the economic outlook. One of the primary purposes of a central bank is to provide the monetary foundation for the financial system and the broader economy. This foundation is made of central bank liabilities. On the Fed's balance sheet, the liability side of the ledger totaled $6.5 trillion as of October 8, and three categories account for roughly 95 percent of that total.2 First, Federal Reserve notes—that is, physical currency—totaled $2.4 trillion. Second, reserves—funds held by depository institutions at the Federal Reserve Banks—totaled $3.0 trillion. These deposits allow commercial banks to make and receive payments and meet regulatory requirements. Reserves are the safest and most liquid asset in the financial system, and only the Fed can create them. The adequate provision of reserves is essential to the safety and soundness of our banking system, the resilience and efficiency of our payments system, and ultimately the stability of our economy. FED’S POWELL: AVAILABLE DATA SHOW TARIFFS PUSHING UP PRICE PRESSURES FED’S POWELL: U.S. CENTRAL BANK HAS OTHER DATA BEYOND GOVERNMENT SOURCES TO USE FED’S POWELL: CURRENT FED POLICY TOOLKIT WORKING VERY WELL POWELL: OUTLOOK HASN’T CHANGED MUCH SINCE SEPTEMBER FED MEETING FED’S POWELL: MAY BE APPROACHING END OF BALANCE SHEET CONTRACTION ‘IN COMING MONTHS’
FED'S BOWMAN Q&A/IIF: USA AMONG 12 NATIONS COMMITTED TO EASING BANK REGULATION #Bowman #FederalReserve #economy FED'S BOWMAN SAYS SUPERVISION SHOULD FOCUS ON MATERIAL RISK FED'S BOWMAN Q&A/IIF: SEE SOFTENING IN JOBS AND CONSUMER SPENDING AMID A HEALTHY ECONOMY #Bowman #FederalReserve #economy
