The US services sector continued to expand in February, according to the latest ISM Services PMI Report, which registered 56.1%. This marks the 20th consecutive month of expansion. The report, issued by Steve Miller, Chair of the Institute for Supply Management's Services Business Survey Committee, highlights a 2.3 percentage point increase from January's figure of 53.8%, the highest since July 2022 (56.5%). However, the S&P Global PMI survey data reveals a modest pace of activity growth in the US service sector during February. The Federal Reserve Bank of Cleveland President, Beth Hammack, emphasizes the early stage of assessing the economic impact of the Iran war, advocating for steady interest rates. The Iran situation is complex, with the country denying talks with the CIA and semi-official sources citing a ministry source for a New York Times report. The conflict has increased volatility in energy and financial markets, raising concerns about its duration and fallout. The Bank of Canada Governor, Macklem, warns of heightened risks from non-bank entities in global debt markets, expressing concern over potential market shocks that could increase interest rate volatility. The global financial system's evolution, marked by the rise of non-bank players like hedge funds and private credit, has added liquidity and flexibility to debt markets but also increased risks to financial stability. Investment firms manage their risks well, but systemic risks can emerge beyond individual firms' sightlines. The Financial Stability Board's Standing Committee on Assessment of Vulnerabilities (SCAV) aims to identify these vulnerabilities by connecting the dots across markets and jurisdictions, ensuring a well-functioning financial system that channels savings into productive investments and supports households and businesses in managing risks. A global perspective with international coordination is essential for the financial system's effectiveness.
