The global economy is navigating a “pivotal moment” characterized by heightened uncertainty, as outlined by the Bank for International Settlements (BIS) in their latest report. The full report can be accessed here. The BIS, often referred to as the central bank for central banks, warns that the U.S.-driven trade war and shifting policies are unraveling the long-standing economic framework.
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Agustin Carstens, the outgoing head of the BIS, emphasized the risks posed by rising protectionism and trade fragmentation, which are exacerbating the prolonged decline in economic and productivity growth. The BIS report, which offers a critical gauge of central bankers’ perspectives, highlights that the world economy is becoming increasingly vulnerable to shocks from various sources, including population aging, climate change, geopolitics, and supply chain disruptions.
According to data from the IndexBox platform, the global economic landscape is further complicated by the post-COVID inflationary pressures that have altered public perceptions of price stability. High levels of public debt are also a concern, as they heighten the financial system’s susceptibility to interest rate changes, thereby limiting governments’ fiscal maneuverability in potential crises.
Hyun Song Shin, the BIS’s chief economic adviser, noted the significant depreciation of the dollar, down 10% since the year’s start. While some speculate this could signal a shift away from U.S. assets, Shin indicated that it remains too early to confirm such a trend, though non-U.S. investors’ hedging activities have contributed notably to the dollar’s recent decline.
In financial terms, the BIS reported a net profit of 843.7 million IMF SDR ($1.2 billion), with total comprehensive income hitting a record high of SDR 3.4 billion ($5.3 billion). Currency deposits at the BIS also reached unprecedented levels, underscoring the institution’s robust financial standing, which Carstens highlighted as essential for maintaining its high creditworthiness.
