$BTC - President-elect Donald Trump may have campaigned hard on high inflation, but by the time he won the election on November 5, financial professionals had shifted from rising prices to worrying about rising U.S. debt, a potential recession and risks to global trade as some of the top threats to financial stability, according to a new Federal Reserve survey released on Friday. "Concerns about the sustainability of U.S. fiscal debt were the most frequently cited risk. They noted that rising Treasury issuance could begin to crowd out private investment or constrain monetary policy responses in the event of an economic slowdown," the survey from the U.S. central bank said, while a weakening economy and the possibility of a global trade war rose on the list of concerns. Those concerns have also been reflected in recent bond market behavior, with 10-year Treasury yields, for example, rising sharply in the past two months despite the Fed cutting its benchmark lending rate twice by a total of 75 basis points. In addition, an estimate of the Treasury term premium—a measure of the compensation investors demand for holding longer-term Treasuries rather than shorter-term ones—was near the top of its range since 2010. In addition, measures of interest-rate volatility were above historical norms, in part due to “high uncertainty about the economic outlook and the associated path of monetary policy, as well as heightened sensitivity to news about output growth, inflation and the supply of Treasuries.” Meanwhile, a potential weakening of the economy and the possibility of a global trade war rose on the list of concerns.“Risks to global trade were specifically cited in this survey, with some respondents noting the possibility that tariff barriers could lead to retaliatory protectionist policies that would negatively affect global trade flows and put renewed upward pressure on inflation,” the survey said. “Others noted that a deterioration in global trade could depress economic activity and increase the risk of a slowdown.” “Persistent inflation,” coupled with the Fed’s tight monetary policy, was cited as the top risk in an earlier survey published in the spring, but it fell to sixth place, along with global trade, in the current survey. The survey, published as part of the Fed’s semiannual Financial Stability Report, was conducted among two dozen financial sector participants and observers from August through October. While it preceded Trump’s election victory, the survey highlights issues that are likely to be central to upcoming debates over taxes, tariffs and other economic issues. Some economists say Trump's planned combination of tax cuts and import tariffs could fuel inflation and already large federal deficits at a time when bond markets have kept Treasury yields elevated.

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