By Marc Jones
London (Reuters) – The central banking organization, the bank of international establishments, has refrained from expressing its usual concerns concerning the increase in debt, noting the positive reaction of the European plans to increase defense spending in response to changes in American security policy.
The central bank of central bankers as a bis is known, warned in its latest world report that the prices of US President Donald Trump have led to unusually high uncertainty and volatility, although it always expects the world economy to avoid recession.
US bond yields, the dollar and actions have all dropped in recent weeks on the signs of the economy that slows down now, while Germany’s dramatic plans to revise its debt limits within the framework of a broader European increase in defense expenses have experienced the highest increase in its bond yields since reunification in 1990.
“The prices wrapped in uncertainty will be doubly useless,” said Hyun Song Shin, economic advisor and responsible for research at BIS, referring to both their unpredictable calendar and to certain other political changes that Trump has made recently.
Commenting on the report on briefing with journalists, Shin said that prices affect the confidence of consumers and businesses and could stir up inflation, causing headaches for central banks.
Asked how market conditions for those of the COVID-19 pandemic and the global financial crisis, he said: “I don’t think we are close to that.”
He said that the “basic case” of the bis was always for a “mild landing” for the world economy.
The American market volatility gauges, such as the VIX index, also remain much lower than the levels during these crises, said Shin, while the increase in German and European bond yields had a much more positive feeling than the peaks observed at the start of the year.
While the recent yield peaks were considered a sign of concern, the last was accompanied by a strong “risk in increase in European actions in the hope of stronger economic growth in Germany, the greatest European economy.
“It is still very early, but it is very remarkable that the increase in yields is very different from tone.”
He also abstained from the traditional warning of the bis of potential debt risks.
“I think it really depends on the race between the growth trajectory and the debt trajectory,” said Shin. “The budgetary ad (German) could be the warning sign of a higher activity.”
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The BIS report has also examined a number of larger trends on the market.
A section has focused on targeting the inflation of central banks over the past 25 years and an increased role, other objectives such as employment have played, especially in certain advanced economies.
