A recent report from the Bank for International Settlements (BIS) highlights the mounting economic and financial instability in the world. While the immediate situation appears upbeat, the BIS warns of risks on the economic and financial front. The report cautions against premature easing of interest rates, as it could reignite inflationary pressures and force costly policy reversals. The BIS emphasizes the need to maintain and strengthen the control of central banks over the economy, shielding them from political pressures. However, the longer-term outlook is not optimistic, with financial vulnerabilities, fiscal positions, and subdued productivity growth casting a shadow [ca536965].
The BIS report warns of tougher tests ahead and indicates that financial cycles have started to turn, savings buffers are dwindling, and debts will have to be refinanced. It identifies commercial real estate as a greater risk to financial stability, with falling demand for office space and higher interest rates leading to downward pressure on prices and losses for lenders. The report also highlights the dangers of the growth of government debt, which could raise the risk of bond market dysfunction. It points to the growth of private credit funds and the difficulty in assessing the risks involved. The BIS suggests that policy prescriptions should target the wages of the working class and government spending. It calls for maintaining lower levels of real wages through high interest rates and warns of persistent wage demands. Additionally, it advocates for fiscal consolidation, which would involve major cuts in social spending [ca536965].
These warnings from the BIS about mounting economic and financial instability add to the concerns raised by the previous article. The combination of unsustainable debt levels, disruptions in global supply chains, and the risks highlighted in the BIS report pose a significant threat to the global economy. Policymakers and market participants must address these issues promptly to prevent a potential crisis. Investors will continue to closely monitor these developments and assess their potential impact on the financial markets and investment decisions [20152461] [ca536965].
In a new development, the Bank for International Settlements (BIS) has released its first comprehensive AI report, urging central banks to embrace AI and leverage it to sharpen their analytical tools. The report emphasizes that AI can provide faster and richer information to detect patterns and risks in the economy and financial system, helping central banks predict and steer the economy better. Major central banks like the Bank of England and the European Central Bank have already started using AI, while others like the US Federal Reserve are exploring the technology. The BIS acknowledges that AI comes with challenges, including cyber-attack risks and bias. However, if central banks embrace AI and keep up with advancements, it can be a net positive for the global financial system. The BIS is leading the way with projects like Aurora and Raven that leverage AI for detecting money laundering and enhancing cyber resilience [d9f472c7] [ca536965].