Bank for International Settlements warns global public debt is at record levels

The Bank for International Settlements (BIS) warned on June 30 that rising public debt levels amid several major elections this year could cause volatility in global financial markets.

Billed as the central bank for banks, the BIS believes the world economy is on track for a “soft landing,” but policymakers, especially politicians, need to be cautious.

Global debt is at record levels and elections from the US presidential election in November to those in France and Britain next week are all at stake.

BIS Managing Director Agustin Carstens said interest rates would not fall to very low levels and price pressures from aging populations, climate change and rebuilding defence capabilities, economic stimulus plans and rising protectionism could cause markets to fluctuate.

As concerns persist about US debt levels, France's debt risk premium surged this month to its highest since the eurozone crisis in 2022, after French President Emmanuel Macron called for early parliamentary elections on June 30.

Mr Carstens said governments must limit the rise in public debt and accept that interest rates may not return to the very low levels they had before the pandemic.

However, the positive thing is that central banks are keeping inflation under control after the pandemic and the conflict between Russia and Ukraine broke out, causing commodity prices to rise.

Mr Carstens mentioned the possibility that inflation would pick up again and central banks would need to continue raising interest rates, but this is not what the BIS forecast.