The US Federal Reserve warned yesterday that the recent attack on Israel and the ongoing Ukraine conflict could cause harm to the world economy and boost global inflation.
Israel’s retaliatory bombing campaign has left more than 4,100 people dead, many of them also civilians, according to the Hamas-run health authorities in Gaza.
Ongoing exchanges of fire with Hezbollah militants along Israel’s northern border with Lebanon have raised fears that the conflict could spread to other countries in the region.
“Escalation of these conflicts or a worsening in other geopolitical tensions could reduce economic activity and boost inflation worldwide,” it added.
Mitigating banking stress
In its report, the Fed also said that policy interventions earlier this year in light of the rapid collapse of Silicon Valley Bank (SVB) had “played a key role in mitigating the stresses in the banking system that emerged in March.”
SVB failed following a bank run by investors concerned by its exposure to interest rate risk in light of the Fed’s aggressive campaign of rate hikes.
A number of other US banks collapsed in the turmoil that followed, which also led to the merger, under pressure, of the Swiss banking giant Credit Suisse with regional rival UBS.
“Since March, volatility has abated and deposit outflows have largely stabilized,” for affected banks, the Fed said.
“But these banks nonetheless continued to face challenges navigating changes in depositor behaviour, higher funding costs, and reduced market values for investment securities,” it added. ― AFP
