Financial instability looms as markets falter and banking crisis persists.

US households have been reducing their savings and increasing their debt, leaving them in a weaker position to withstand an economic downturn. Recent turmoil in the banking industry has raised fears of a slowing economy, causing banks to tighten lending, putting added pressure on already strained consumers. Americans have spent down about half of the savings they accumulated during the pandemic, while the amount of debt they are carrying has soared. Investors, economists, and corporate executives are closely watching what moves the Federal Reserve will make on interest rates next week, with another round of rate increases making it costlier for consumers to borrow money.