Bank for International Settlements warns of economic risks amid Trump policy uncertainties

BIS warns of economic risks, central bank challenges amid Trump policy uncertainties

The Bank for International Settlements (BIS) has issued a warning about the economic and financial risks stemming from U.S. President Donald Trump’s trade policies and deregulation efforts. BIS head Agustín Carstens highlighted concerns over trade tensions, fiscal policy, regulation, immigration, and broader geopolitical uncertainties.

Carstens warned that heightened policy uncertainty could weigh on economic growth, as businesses delay investment and households postpone major purchases. Financial markets may also experience increased volatility, with significant currency and asset price fluctuations, particularly impacting Canada, Mexico, and China.

He noted that exchange rate depreciation could drive inflation higher, urging central banks to remain focused on price stability. Loose fiscal policies and rising debt levels could further fuel inflation and put financial stability at risk, he cautioned.

Carstens also pointed to the risk of growing divergence between U.S. interest rates and those of other major economies. With U.S. growth outpacing much of the world, differences in central bank policies could influence capital flows, exchange rates, and global financial conditions.

The BIS, a key forum for central banks and host of the Basel Committee for Banking Supervision, is particularly concerned about Trump’s policies undermining global financial regulations, raising fears of a regulatory race to the bottom, especially in Europe.

This article was written by Eamonn Sheridan at www.forexlive.com.