The Bank of England said the outlook for the global economy has “significantly worsened” after Higher commodity prices will increase inflation worldwide. This, as indicated by the foundation, represents a downside risk over the coming months.
Instability The cost of energy and raw materials presents a significant risk of changes that may amplify economic crises In the future, the central bank said. Officials will investigate the “blackout” and “lack of data” in commodity markets and how this is reinforcing the vulnerability.
Andrew Bailey The Governor of the Bank of England said:The global economic outlook has deteriorated significantly“Developments related to the Russian invasion of Ukraine are a major aspect that will affect the global outlook,” he said.
The warning is part of the Bank of England’s Financial Stability Report (FPC), which was released on Tuesday. Foundation officials said so in September Annual stress tests will be conducted on banks, which Assessing the possibility of a “deep” recession and a further increase in interest rates.
In return, they raised the countercyclical capital margin that banks must maintain to 2%, the same level it was before the pandemic, which will take effect in July 2023. The Bank of England has relaxed regulatory capital requirements so that companies can continue to contribute money to the economy.
“Because of the significant uncertainty surrounding the forecast, the FPC will continue to monitor the situation,” Bailey said. “We are ready to change the rate UK CC&B, Either way, depending on how the risk develops“.
According to Bailey, the turmoil in commodity markets highlights vulnerabilities and links with the rest of the economy.
“Dealing with it will require commitment from a wide range of financial authorities,” Bailey said. “The Financial Stability Board (financial stability bank) A detailed analysis and assessment of vulnerabilities in commodity markets has begun“.
The Governor of the Bank of England said that The business will think of the “opacity and absence of data” in some markets and how “weaknesses relate to physical markets, non-financial entities, or entities from other countries.”
Most UK households and businesses are in a position to deal with financial stress, Despite increases in inflation and borrowing costs. UK banks’ capital strength remains ‘strong, profitability boosted’as the Bank of England says in the report.
“The British companies still have a reasonable level of debt servicing‘, according to the report. ‘Nevertheless, Prices are expected to rise and input prices, weak economic growth and continued supply chain disruptions affect the balance sheets of companies.“
The bank stated that Global inflationary pressures intensified after the Russian invasion of Ukraineso the real income Homes are being pressured by rising prices.
In any case, A wage increase and a package of government support measures will soften the blow It will allow the fragile number of borrowers to remain stable relative to levels at the beginning of the year. This is because some borrowers forgo cheap fixed rate loan offers and have to refinance at higher interest rates.
This article was translated by Mariam Salazar
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