Financial Stability Report shows continued global risk and uncertainty

The BoE has published the Financial Policy Committee’s Financial Stability Report for November 2024.

The report shows that uncertainty remains high due to risks associated with geopolitical tensions, global fragmentation (meaning reduced co-operation on trade and internal policy) and pressures on government debt levels remaining material.

The FPC encourages efforts to build UK and global resilience to cyber-attacks, which are more likely during times of geopolitical tension. Long-term government borrowing costs in the UK and US have also increased following the UK budget and the US election. Despite continued interest rate cuts, and volatility in prices around the budget and election, core markets have maintained stability.

The report draws specific attention to how a deterioration in perceptions around the sustainability of governments’ long-term debt approaches could lead to higher rates and sharp movements in market prices.

The FPC also notes that increased debt and debt servicing costs for governments during refinancing could increase the cost of borrowing and refinancing of debt for households and businesses. The FPC highlights the importance of banks and other financial firms preparing accordingly for these risks In terms of corporate borrowing, the challenge of refinancing existing debt at higher rates is particularly prominent in the commercial property sector.