The Bank for International Settlements (BIS) has issued a warning about the growing risks to the global economy. In its Annual Economic Report, the BIS cites rising public debt, financial fragilities, and the potential for high inflation as key concerns.

Key Pressure Points

The report highlights four main areas of concern: inflation, the sustainability of the artificial intelligence (AI) boom, financial vulnerabilities, and the need for disciplined policymaking. The BIS notes that inflation has picked up again, and that more frequent supply disruptions could lead to higher inflation expectations becoming entrenched among households and businesses.

The recent surge in investment tied to AI has boosted confidence and supported growth, but it also raises fears about jobs and the potential for overinvestment. The BIS warns that supply bottlenecks and intense competition could lead to the kind of overinvestment seen in previous boom-and-bust cycles.

Financial vulnerabilities remain another area of concern, with elevated asset valuations and signs of investor complacency leaving core bond markets more fragile. The financing of the AI boom also looks increasingly reliant on debt and complex funding structures across the supply chain.

The BIS is urging policymakers to prioritize price stability, ensure fiscal sustainability, coordinate and strengthen oversight beyond the banking sector, and pursue structural reforms. The bank’s General Manager, Pablo Hernandez de Cos, emphasized the need for disciplined policymaking, saying that success depends on sound fiscal and financial foundations.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.