Federal Reserve Governor Michelle Bowman signaled openness to raising interest rates in December due to resilient employment conditions and inflation remaining persistently above the 2% target. Financial stability risks are compounding this hawkish posture, particularly regarding an estimated $800 billion in artificial intelligence debt marked by complex, off-balance-sheet arrangements between large and small technology companies. Bowman warned that any sudden equity slump could cascade through consumer spending and private borrowing markets. Several other central bank leaders also pushed on Tuesday for immediate policy tightening to combat hotter-than-expected price pressures.
Key points
A potential stock market correction driven by disappointing technology returns could depr…: A potential stock market correction driven by disappointing technology returns could depress consumer spending and elevate borrowing costs for small businesses.
Federal Reserve policymakers are building a strong consensus to resume interest rate incr…: Federal Reserve policymakers are building a strong consensus to resume interest rate increases at the final meeting of the year.
Above-target inflation and firming labor conditions are continuing to push central bank o…: Above-target inflation and firming labor conditions are continuing to push central bank officials toward tighter monetary policy.
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Federal Reserve Governor Michelle Bowman said she sees a number of risks to economic activity from financial markets, including a sharp downturn in stock prices if returns on investments in artificial intelligence fall short of expectations.
Speaking in Washington on Tuesday, Bowman flagged the risk of “a large correction in equity valuations” stemming from AI returns, along with “a sharp increase in private longer-term rates.”
“Lower equity prices could undermine the resilience in consumer spending,” she said. “And higher interest rates could further strain interest-rate-sensitive sectors of the economy, like housing and small business investment.”
Bowman also signaled she could support an interest-rate hike at the central bank’s final meeting of the year next month, amid persistently elevated inflation.
“Today I am seeing signs that inflation pressures are persisting, while labor market conditions appear to be firming,” she said. “This indicates that there is still work to do to bring inflation closer to 2%.”
Fed officials left interest rates unchanged at their Oct. 27-28 meeting after raising them by a quarter percentage point in September. That was the first rate…
Russian stocks ended lower at the close of trade, driven down by broad market declines. The benchmark MOEX Russia Index fell 1.21% by the end of the trading session.
Investors reacted negatively after the specialty automotive company introduced additional shares to the market. The newly announced transaction prompted immediate downward pressure on valuation as trading responded to the upcoming equity sale. This move directly triggered the market pullback as participants adjusted to the planned influx of shares.
Investors in the artificial intelligence startup are working to sell stakes tied to a potential public debut through intermediary channels. This secondary market activity reflects early efforts by existing stakeholders to secure liquidity ahead of any official listing. Facilitated transactions in pre-IPO equity often indicate shifting private valuation expectations and high institutional demand.