The Bank of England has warned that the ongoing Middle East conflict has triggered a “substantial negative supply shock” to the global economy, raising concerns over inflation, growth, and broader financial stability.
In its latest quarterly update on risks to the financial system, the Bank said the war has sharply intensified pressure on global markets, particularly through a surge in oil prices, which is expected to push inflation higher across multiple economies.
According to the Bank, the fallout from the conflict is likely to slow economic growth and tighten financial conditions, including the potential for banks to restrict lending to households and businesses.
“Adverse impacts on the global macroeconomy increase the likelihood that multiple vulnerabilities could crystallise at the same time, amplifying their effect on financial stability,” the Bank said.
The warning comes as the global economy was already facing elevated risks before the outbreak of the latest hostilities. In its previous Financial Policy Committee report published in December, the Bank had flagged vulnerabilities linked to an overvalued artificial intelligence sector and persistently high levels of government debt.
“The conflict has made the global environment materially more unpredictable and followed a period in which global risks were already elevated,” the Bank added.
The central bank further cautioned that the economic fallout could disrupt “the provision of vital financial services to UK households and businesses,” although it maintained that the UK banking system remains resilient enough to support the domestic economy even if conditions deteriorate significantly beyond current expectations.
Ahead of the Bank’s update, British Prime Minister Keir Starmer moved to reassure the public, saying the country was prepared to withstand the economic turbulence.
“No matter how fierce this storm, we are well-placed to weather it and… we have a long-term plan to emerge from it a stronger and more secure nation,” Starmer said during a press conference at 10 Downing Street.
UK Finance Minister Rachel Reeves also said the government was “preparing for all eventualities” as pressure mounts on the Labour government to ease the burden on consumers, particularly through calls for a cut in fuel duty.
However, Reeves cautioned against promises of broad relief from price increases, warning that such interventions could worsen inflation and create longer-term economic pressures.
“If I promised that I could alleviate every price increase for every person, I wouldn’t be telling the truth, because all that you will be doing if you do that is pushing up inflation, interest rates and taxes in the future,” she said.
The Bank of England’s latest assessment underscores growing fears that geopolitical instability in the Middle East could have far-reaching consequences for global markets, consumer prices, and financial systems far beyond the immediate conflict zone.
ADEOLA KUNLE
No comments:
Post a Comment