BIS tells central banks to keep lifting rates but warns of trade war threat between China and US
Bank for International Settlements chief says ‘we are entering into a dangerous dynamic’
The Bank for International Settlements (BIS) urged the world’s top central banks to keep lifting interest rates on Sunday, but warned escalating trade tensions between the United States and China could turn into a dangerous downward spiral.
The new head of the BIS, former Mexican central bank chief Agustin Carstens, spoke to Reuters as the central bank umbrella group delivered its first annual report under his watch.
It comes after a volatile five months for the global economy that has seen last year’s financial market rally shudder to a stop and US President Donald Trump cause widespread dismay by imposing hundreds of billions of dollars worth of trade tariffs.
“We are entering into a dangerous dynamic where these type of [protectionist] issues start having side effects on currency markets and financial flows,” Carstens said.
“We can start a very dangerous spiral that at some point can really affect the growth of the world economy and financial stability.”
For the time being though the baseline BIS scenario is that as long as there is no galloping escalation in the trade tensions or borrowing costs, the global economy will continue to improve.
