BIS warns of high levels of public debt

London. The Bank for International Settlements (BIS) warned yesterday that rising public debt, in the context of important elections this year, could shake up global financial markets.

The central bank of central bankers said the global economy is heading towards the soft landing which many economists questioned when interest rates soared, but politicians must be careful.

Global public debt is already at record levels and elections, from the November presidential election in the United States, to recent ones in Mexico and South Africa, to those in France and Britain these days, carry risks, he added.

Interest rates are nowhere near returning to ultra-low levels and cost pressures from an ageing population, climate change and the rebuilding of defence capabilities, economic stimulus plans and a general rise in protectionism could destabilise sensitive markets, said BIS Managing Director Agustín Carstens.

They can surprise without warningCarstens said, recalling the turmoil in British markets following the budget plans of then Prime Minister Liz Truss, which put some pension funds at risk of collapse.

Adding to lingering concerns about U.S. debt levels, the risk premium on French debt has soared this month to its highest level since the eurozone crisis in 2012, after President Emmanuel Macron called for early parliamentary elections.

Despite this, the former governor of the Bank of Mexico told reporters that Compared to last year, we are in a much better place..

He said central banks deserved praise for navigating a difficult path that could have led to a wave of recessions, but added that they needed to persevere, comparing the fight against inflation to a course of antibiotics to combat a disease.

He also described a scenario extreme where inflation would soar again and central banks would have to raise rates further.