By Andrew Ackerman
WASHINGTON -- The coronavirus pandemic remains a top risk to the U.S. financial system, the Federal Reserve said in a report released Monday, warning that uncertainty over the course of the virus and its economic and financial consequences remains unusually high.
If the pandemic persists for longer than anticipated -- especially if there are extended delays in the production or distribution of a successful vaccine -- that could derail the nascent recovery and strain financial markets and institutions, the Fed said in its latest financial stability report.
"Investor risk appetite and asset prices have increased in recent months but could suffer significant declines should the pandemic take an unexpected course or the economic recovery prove less sustainable," the report said.
Top Fed officials have been outspoken in recent months about the need for additional government spending because the central bank's tools are reaching the limits of their effectiveness.
Fed officials cut interest rates to zero in March and expanded their asset portfolio to $7 trillion in June from $4 trillion before the pandemic hit. They launched an array of emergency lending programs in the spring, unveiled a new policy framework in August and formalized new interest-rate guidance in September.
In March, as governments around the world shut down swaths of the global economy to slow the spread of the novel coronavirus, investor panic caused widespread turmoil in financial markets. That prompted a blitz of measures y the Fed and other central banks to keep credit flowing through the economy as investors and financial firms scrambled to preserve cash.
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(END) Dow Jones Newswires