![]() ![]() Also in play is the Fed’s move to shrink the size of its balance sheet, which means that the central bank is withdrawing support from critical bond markets that serve as benchmarks for global lending.Īsset values have been hard hit by the Fed’s actions and there are broad worries about liquidity in markets for securities like U.S. Raskin weighed in as many market participants fear the Fed’s rate rises, which will almost certainly run into next year and will lift the Fed’s short-term target rate to levels not seen in decades, will cause some sort of major stress in the financial sector. With the Fed motivated by its monetary policy goals, “financial stability is, my guess, not fully integrated into decision making.” “When you have a lot in motion, stuff happens, like stuff can break,” she said, adding “you see your vulnerabilities any time when interest rates start to increase.” ![]() “Things are fragile” due to so many developments, Raskin said. She said she was not sure Fed officials were paying close enough attention to the issue given their laser-like focus on taking action to lower inflation from 40-year highs. Raskin did not say where trouble would come from if it arrives, only that the current situation, with Fed action, disrupted economies and risks from Russia's war on Ukraine, is ripe to generate some ugly confluence of events. Raskin was also a Treasury official in the Obama Administration and before that, she served as Fed governor from 2010 to 2014. She had been named to be the Fed’s point person on financial regulation last year before withdrawing. Raskin is currently a law professor at Duke University. NEW YORK, Oct 20 (Reuters) - As the Federal Reserve pushes forward with aggressive rate rises to bring down surging inflation it may unintentionally break something in the financial sector, a risk it may not be thinking enough about, a former top government policymaker said.Ĭiting the recent heavy market turbulence that struck the United Kingdom, Sarah Bloom Raskin told a University of Pennsylvania conference Thursday that those overseas events were “a warning of sorts” for the United States. ![]()
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