Trade tensions and geopolitical risks that fainting exposure the error line in the global financial system, the body of the payung bank of the bank central bank for international settlements, said in its latest assessment of the world economic condition.
The head of the bus that came out, is often nicknamed the Central Bank central bank, AgustÃn Carstens, said the trade war driven by the US and other shift in policies frozen in the long -standing economic order.
He said the global economy was in “important moments”, entering “new era of uncertainty and increased uncertainty”, which tested public trust in institutions, including the central bank.
Bank reports were issued more than a week before the deadline for US Presidential President Donald Trump on July 9 and came after six months of intense geopolitical upheaval.
When asked about Trump’s criticism of Federal Reserve as Jerome Powell, which included Trump labeling Fed’s chair as “stupid”, he was not too critical.
“It is expected that at certain points in the time that there will be friction,” former Mexican Central Bank Governor Carstens told reporters, referring to the relationship between the government and the central bank. “This is almost a design”.
Dot dollars
The BIS Annual Report, published on Sunday, is seen as an important measure of central banker thinking given the routine meeting of leading policy makers based in Switzerland.
Increasing protectionism and trade fragmentation is “specifically concerning” because they worsened the decline in economic growth and productivity that had been decades, Carstens said.
There is also evidence that the world economy is less resistant to shocks, with population aging, climate change, geopolitics and supply chain problems that all contribute to a more stable environment.
Post-Covid inflation surge seems to have an eternal impact on public perception of price movements as well, a study in the report shows.
High levels of public debt and increase increase the vulnerability of the financial system to interest rates and reduce the ability of the government to spend a way out of the crisis.
“This trend cannot continue,” Carstens said, referring to an increase in the level of debt and he said that higher military expenditure could encourage further debt.
Hyun Song Shin, the main economic advisor to the bus, also marked a sharp decline in the dollar. Down 10% since the beginning of the year and in its path to the largest H1 decline since the era of the free-floating exchange rate began in the early 1970s.
He said there was no evidence that this was the beginning of “great rotation” of US assets as suggested by several economies, but admitted that it was still too early to find out sovereign funds and the central bank moved slowly.
Short-term analysis, however, shows the “hedge of value” by non-US investors who hold treasury and other US assets seem to have made “important contributions” for the decline in dollars over the past few months.
“We haven’t seen anything (not) who will give us a reason for alarm,” Shin added.
The bus has issued a part of its report last week which gave a striking warning about a quick increase called stablecoin.
In the case of the BIS’s own finances, it is said to produce net profit of 843.7 million IMF SDR ($ 1.2 billion), while the total comprehensive income reached the highest record of SDR 3.4 billion ($ 5.3 billion) and currency deposits in the bank also reached a new height.
“It is important that the bus has the highest credit feasibility out there,” Carstens said.
Source: Reuters
