FPC updates on stability risks

The Financial Policy Committee’s summary of the financial stability risks following its October review notes:

  • that more persistent inflation, higher interest rates and geopolitical tensions continue to make the current risk outlook challenging;
  • costs of living pressures and higher borrowing costs continue to challenge UK households and businesses – although the proportion of income households spend on mortgages is still expected to remain below the 2007 peak, and although the number of mortgage holders in default has risen slightly, it is still low by historical standards;
  • the UK banking system can support the challenges, even if economic conditions are worse than expected, and the counter cyclical buffer rate is maintained at 2%; and
  • global work is still required to address the risks of non-bank finance. Certain risky assets like some types of corporate bonds could be overvalued

Emma Radmore