Latest news with #AgustinCarstens
Bloomberg
10-07-2025
- Business
- Bloomberg
The UK Is Struggling to Shake Off the Bond Vigilantes
I'm Craig Stirling, a senior editor in Frankfurt. Today we're looking at how the UK faces more financial-market scrutiny than its peers on public finances. Send us feedback and tips to ecodaily@ And if you aren't yet signed up to receive this newsletter, you can do so here. 'High levels of public debt are a significant vulnerability that governments can no longer ignore,' was what Bank for International Settlements chief Agustin Carstens warned in his final speech in June. That echoed a cacophony of alarm bells from global monetary officials over the past months and years.
Khaleej Times
29-06-2025
- Business
- Khaleej Times
World economy faces 'pivotal moment', central bank body BIS says
Trade tensions and fractious geopolitics risk exposing deep fault lines in the global financial system, central bank umbrella body the Bank for International Settlements, said in its latest assessment of the state of the world economy. The outgoing head of the BIS, often dubbed the central bankers' central bank, Agustín Carstens, said the US-driven trade war and other policy shifts were fraying the long-established economic order. He said the global economy was at a "pivotal moment", entering a "new era of heightened uncertainty and unpredictability", which was testing public trust in institutions, including central banks. The bank's report is published just over a week before U.S. President Donald Trump's trade tariff deadline of July 9 and comes after six months of intense geopolitical upheaval. When asked about Trump's criticisms of US Federal Reserve Jerome Powell, which have included Trump labelling the Fed chair as "stupid", he was not overly critical. "It is to be expected at certain points in time that there will be friction," former Mexican central bank governor Carstens told reporters, referring to the relationship between governments and central banks. "It is almost by design". Dollar drop The BIS' annual report, published on Sunday, is viewed as an important gauge of central bankers' thinking given the Switzerland-based forum's regular meetings of top policymakers. Rising protectionism and trade fragmentation were "particular concerning" as they were exacerbating the already decades-long decline in economic and productivity growth, Carstens said. There is also evidence that the world economy is becoming less resilient to shocks, with population ageing, climate change, geopolitics and supply chain issues all contributing to a more volatile environment. The post-Covid spike in inflation seems to have had a lasting impact on the public's perception about price moves too, a study in the report showed. High and rising public debt levels are increasing the financial system's vulnerability to interest rates and reducing governments' ability to spend their way out of crises. "This trend cannot continue," Carstens said referring to the rising debt levels and he said that higher military spending could push the debt up further. Hyun Song Shin, the BIS's main economic adviser, also flagged the sharp fall in the dollar. It is down 10% since the start of the year and on track to be its biggest H1 drop since the free-floating exchange rate era began in the early 1970s. He said there was no evidence that this was the start of a "great rotation" away from US assets as some economists have suggested, but acknowledged that it was still too early to know given sovereign funds and central banks move slowly. Shorter-term analysis, though, showed "hedging" by non-US investors holding Treasuries and other US assets appears to have made an "important contribution" to the dollar's slide over the last few months. "We haven't seen anything (yet) that would give us any cause for alarm," Shin added. The BIS had already published one part of its report last week that gave a stark warning about the rapid rise of so-called stablecoins. In terms of the BIS' own finances, it said it made a net profit of 843.7 million IMF SDR ($1.2 billion), while its total comprehensive income reached a record high of SDR 3.4 billion ($5.3 billion) and currency deposits at the bank also reached a new high. "It is important that the BIS has the highest creditworthiness out there," Carstens said.
Yahoo
29-06-2025
- Business
- Yahoo
Alarm over mounting debts after Starmer's about-turn on welfare
Ballooning government debts across Britain and the West risk triggering a global economic crisis, the Bank for International Settlements (BIS) has warned. In a stark warning to Sir Keir Starmer after his about-turn on welfare cuts, the BIS said highly indebted countries can no longer keep borrowing vast sums to help plug funding gaps. Given the threat of slow growth, high borrowing costs and geopolitical turmoil, Agustin Carstens, the BIS chief, said: 'High levels of public debt are a significant vulnerability that governments can no longer ignore.' The warning from the BIS, known as the central bank for central banks, came just days after the Prime Minister caved in to pressure from rebel MPs by abandoning plans to save £5bn on welfare. Instead, he has introduced a fleet of concessions on disability benefits that are expected to cost as much as £3bn, piling further pressure on Britain's strained public finances. Asked about the fiscal challenges facing the likes of Britain, Mr Carstens said: 'It is obvious that the debt [to GDP ratio] in many countries has risen quite fast in recent decades, and this trend cannot continue. 'We are not saying that in these countries a fiscal crisis is imminent. But the trend is not the right one.' This also applies to countries such as France, he said, which is under pressure from soaring borrowing costs; and the US, where Donald Trump is seeking to cut taxes by increasing America's deficit. Mr Carstens said that the sooner governments start to reduce their deficits, the less painful the shift will be. This is particularly important to stave off the threat of any future crisis like the pandemic, he added. Britain's national debt stands at £2.9 trillion, according to the Office for National Statistics, up from £1.6 trillion a decade ago and £349bn at the turn of the century. As a share of GDP, debt has risen from 32.4pc in 2000 to 96.4pc today. 'While high debt can be sustainable when growth is robust and interest rates low, today's conditions are far less supportive,' Mr Carstens said in a speech. 'Rising interest payments, driven by higher rates and refinancing needs, are putting pressure on fiscal accounts and increasing fiscal sustainability risks. Already, there are signs of weakening investor appetite for government bonds.' Hyun Song Shin, the most senior economist at the BIS, said that rising debt interest payments are particularly troubling for governments around the world. 'Even if debt is sustainable, there could be a sense that debt is too high if, for example, debt servicing costs are higher than some of the core items of expenditure in the economy – education, defence,' he said. In Britain's case, the Government spends more than £110bn per year on debt interest, according to the Office for Budget Responsibility. That is higher than spending on defence – the department's budget is £62.2bn this year – or education, at £100.9bn. The BIS also warned that the cost of living crisis has made households more sensitive to price rises, meaning that central banks in turn must be more vigilant in squashing any signs of resurgent inflation. A Treasury spokesman said: 'As set out in the Plan for Change, the best way to strengthen public finances is by growing the economy – which is our focus. 'Changes to tax-and-spend policy are not the only ways of doing this, as seen with our planning reforms, which are expected to grow the economy by almost £7bn and cut borrowing by over £3bn. The fiscal rules are non-negotiable, and we will set out our fiscal plans in the autumn.' Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Irish Times
29-06-2025
- Business
- Irish Times
Resurgent inflation could unfold as world economy reels from Trump's trade policies
Resurgent US inflation could unfold as the world economy reels from Donald Trump's disruptive trade policies, the Bank for International Settlements (BIS) warned. That bleak scenario was described by general manager Agustin Carstens, presenting an annual report that catalogued how existing global vulnerabilities have been further exposed by the American president's actions since taking office in January. 'We were meant to have a soft landing – everything was going according to plan,' the former Mexican central-bank chief told reporters. 'Then we had this very substantive period of volatility with the threat that tariffs would make more difficult convergence towards 2 per cent in some countries.' The final report of Mr Carstens' term in office, published Sunday, details a backdrop of economic uncertainty at 'levels typically associated with crises,' driven by higher import levies imposed by the White House, albeit limited for now during a 90-day hiatus. READ MORE Growth prospects have diminished while risks have intensified with regard to the stability of consumer prices, public finances and the financial system, the BIS said. Facing such challenges, the Basel officials counsel central banks to stay focused on core missions in order to preserve and foster trust, and to enhance the effectiveness of their actions. Mr Carstens highlighted how the Federal Reserve may encounter an especially hard time in the current environment. Chair Jerome Powell is steadfastly resisting White House pressure to cut interest rates. 'In the US, you could face a very difficult scenario for the central bank, which is when you have higher inflationary pressures or deviating inflationary expectations and a slowdown in the economy,' he said. 'That is a circumstance that central banks usually find particularly difficult.' In a speech to central bankers on Sunday, Mr Carstens highlighted how it's not just monetary officials who have a responsibility to foster credibility in economic management. 'Trust cannot stop at monetary policy and the door of the central bank,' he said. 'It must extend to every aspect of public policy. People must trust that policymakers and elected officials will act to advance legitimate objectives and will do so effectively.' The BIS report frequently emphasized inflation risks, including how trade disruption could hit economies already squeezed by aging populations and labour shortages, and hurt the supply of goods. Officials stressed that the increased sensitivity of consumers after the pandemic may combine with still-heightened expectations on living costs to feed renewed challenges on price stability. Such analysis in light of recent spikes in crude oil that have since partially receded may give policymakers pause. 'It's a case of once bitten, twice shy,' said Hyun Song Shin, economic adviser at the BIS. 'It's very important to make sure that just a one-off price increase does not translate into a sustained inflation episode.' Other dangers relate to unprecedented national debt accumulated in some countries. Among OECD members, interest payments as a percentage of gross domestic product reached 4 per cent last year and will keep rising, the report said. 'Risks to inflation and financial stability can more easily originate from or be propagated through stress in sovereign bond markets,' the BIS said. 'Growing concerns about fiscal sustainability could give rise to refinancing challenges and potentially dislodge inflation expectations.' Meanwhile officials warned that the threat could emanate in the other direction too, with volatile or persistent price increases driving up government bond yields. The way investors respond to global developments is another sensitivity. A separate chapter analysed how global financial markets have become more connected, transmitting conditions faster from one economy to another. 'Macro-financial vulnerabilities have the potential to amplify economic developments, including the anticipated slowdown triggered by the shift in trade policy and heightened uncertainty,' the report said. The BIS laid out a list of policy prescriptions to promote growth and productivity, such as loosening labour markets, cutting bureaucracy, removing trade barriers and raising public investment, while also counselling fiscal repair. On supervision, officials warned against any loosening of bank regulatory requirements, and called for close monitoring of non-bank financial institutions. As for central banks, the BIS advised them to 'carefully balance' growth and inflation risks, especially given how an era when consumers took price shocks in their stride seems to have passed. 'That world has ended,' said Andrea Maechler, the BIS deputy general manager. 'Now there's a much bigger sensitivity whenever you see any price increase – the fear that it's not just a simple price increase, but that it affects the inflation dynamics.' – Bloomberg
Yahoo
29-06-2025
- Business
- Yahoo
Tariffs threaten Fed with real inflation headache, BIS says
(Bloomberg) — Resurgent US inflation could unfold as the world economy reels from Donald Trump's disruptive trade policies, the Bank for International Settlements warned. Philadelphia Transit System Votes to Cut Service by 45%, Hike Fares US Renters Face Storm of Rising Costs Squeezed by Crowds, the Roads of Central Park Are Being Reimagined Sprawl Is Still Not the Answer Mapping the Architectural History of New York's Chinatown That bleak scenario was described by General Manager Agustin Carstens, presenting an annual report that catalogued how existing global vulnerabilities have been further exposed by the American president's actions since taking office in January. 'We were meant to have a soft landing — everything was going according to plan,' the former Mexican central-bank chief told reporters. 'Then we had this very substantive period of volatility with the threat that tariffs would make more difficult convergence towards 2% in some countries.' The final report of Carstens' term in office, published Sunday, details a backdrop of economic uncertainty at 'levels typically associated with crises,' driven by higher import levies imposed by the White House, albeit limited for now during a 90-day hiatus. Growth prospects have diminished while risks have intensified with regard to the stability of consumer prices, public finances and the financial system, the BIS said. Facing such challenges, the Basel officials counsel central banks to stay focused on core missions in order to preserve and foster trust, and to enhance the effectiveness of their actions. Carstens highlighted how the Federal Reserve may encounter an especially hard time in the current environment. Chair Jerome Powell is steadfastly resisting White House pressure to cut interest rates. 'In the US, you could face a very difficult scenario for the central bank, which is when you have higher inflationary pressures or deviating inflationary expectations and a slowdown in the economy,' he said. 'That is a circumstance that central banks usually find particularly difficult.' In a speech to central bankers on Sunday, Carstens highlighted how it's not just monetary officials who have a responsibility to foster credibility in economic management. 'Trust cannot stop at monetary policy and the door of the central bank,' he said. 'It must extend to every aspect of public policy. People must trust that policymakers and elected officials will act to advance legitimate objectives and will do so effectively.' The BIS report frequently emphasized inflation risks, including how trade disruption could hit economies already squeezed by aging populations and labor shortages, and hurt the supply of goods. Officials stressed that the increased sensitivity of consumers after the pandemic may combine with still-heightened expectations on living costs to feed renewed challenges on price stability. Such analysis in light of recent spikes in crude oil that have since partially receded may give policymakers pause. 'It's a case of once bitten, twice shy,' said Hyun Song Shin, economic adviser at the BIS. 'It's very important to make sure that just a one-off price increase does not translate into a sustained inflation episode.' Other dangers relate to unprecedented national debt accumulated in some countries. Among OECD members, interest payments as a percentage of gross domestic product reached 4% last year and will keep rising, the report said. 'Risks to inflation and financial stability can more easily originate from or be propagated through stress in sovereign bond markets,' the BIS said. 'Growing concerns about fiscal sustainability could give rise to refinancing challenges and potentially dislodge inflation expectations.' Meanwhile officials warned that the threat could emanate in the other direction too, with volatile or persistent price increases driving up government bond yields. The way investors respond to global developments is another sensitivity. A separate chapter analyzed how global financial markets have become more connected, transmitting conditions faster from one economy to another. 'Macro-financial vulnerabilities have the potential to amplify economic developments, including the anticipated slowdown triggered by the shift in trade policy and heightened uncertainty,' the report said. The BIS laid out a list of policy prescriptions to promote growth and productivity, such as loosening labor markets, cutting bureaucracy, removing trade barriers and raising public investment, while also counseling fiscal repair. On supervision, officials warned against any loosening of bank regulatory requirements, and called for close monitoring of non-bank financial institutions. As for central banks, the BIS advised them to 'carefully balance' growth and inflation risks, especially given how an era when consumers took price shocks in their stride seems to have passed. 'That world has ended,' said Andrea Maechler, the BIS deputy general manager. 'Now there's a much bigger sensitivity whenever you see any price increase — the fear that it's not just a simple price increase, but that it affects the inflation dynamics.' —With assistance from Bastian Benrath-Wright and Zoe Schneeweiss. America's Top Consumer-Sentiment Economist Is Worried How to Steal a House Inside Gap's Last-Ditch, Tariff-Addled Turnaround Push Apple Test-Drives Big-Screen Movie Strategy With F1 Luxury Counterfeiters Keep Outsmarting the Makers of $10,000 Handbags ©2025 Bloomberg L.P. 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