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The BIS warned of the impact on financial markets

The BIS warned of the impact on financial markets
The BIS warned of the impact on financial markets

The Bank for International Settlements believes the global economy is heading for a “soft landing” and it doubts that interest rates will reach very low levels this year.

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He Bank for International Settlements (BIS) warned on Sunday that the increase in public debtin a context of important elections this year, could shake the global financial markets.

Dubbed the central bank of central bankers, the BIS said the global economy is now heading toward the “soft landing” that many economists doubted when it was announced. interest rates shot upbut said authorities, especially politicians, must be careful.

The Global public debt is now at record levels and elections, from the US presidential elections in November, through the recent ones in Mexico and South Africa, to those in France and Great Britain these days, carry risks.

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The US presidential election led Joe Biden's administration to increase public spending

The US presidential election led Joe Biden’s administration to increase public spending

Doubts about interest rates

The general director of the BIS, Agustín Carstens, stated that, since Interest rates are no closer to returning to ultra-low levels and cost pressures from ageing populations, climate change and the rebuilding of defence capabilities, economic stimulus plans and a general rise in protectionism could destabilise sensitive markets.

“They can surprise you without warning,” says Carstens, pointing to the turbulence in British markets following then-Prime Minister Liz Truss’s budget plans, which put some pension funds at risk of collapse. “You really want to avoid that.”

In addition to the persistent concern about US debt levelsthe risk premium on French debt has soared this month to its highest level since the euro zone crisis in 2012, after the president, Emmanuel Macron, called early parliamentary elections to be held on Sunday and which They could give rise to a far-right government.

Carstens said the BIS was not naming “one or two” governments, but the message was clear.

“They must cut the increase in public debt and accept that interest rates will not return to their pre-pandemic ultra-low levels,” he said. “We need a solid foundation to build on.”

Source: Ambito

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