BoE flags risk of sharp fall in global asset prices

The Bank of England (BoE) warned on Wednesday that global asset prices remain stretched and vulnerable to a sharp fall as concerns over intensified geopolitical risks.

In its quarterly Financial Policy Committee (FPC) statement, the BoE noted that, despite a rapid rebound in asset prices after an August sell-off, markets are susceptible to a correction, particularly in equities.

Geopolitical risks, including conflicts in the Middle East and Ukraine, as well as the US presidential election, are driving uncertainty. A BoE survey of major financial firms showed concerns over geopolitical risks were at their highest level since the survey began in 2008.

The BoE also flagged high levels of public debt in major economies as a potential financial stability risk. Britain’s public debt now stands at 100 per cent of national income. Despite these risks, most British households and businesses are coping well with high interest rates, though some small businesses face challenges.

The BoE maintained its counter-cyclical capital buffer at 2 per cent and said interest rate cuts are expected, with a potential reduction from 5 per cent to 4.75 per cent in November.

Attribution: Reuters

Subediting: M. S. Salama