The Bank for International Settlements (BIS) has published its Annual Economic Report 2025, warning that heightened trade tensions and policy uncertainty are weakening the growth outlook, increasing economies’ exposure to inflation pressures, and risking deeper fault lines in the global economy and financial system. The report calls for policymakers to act as a stabilising force, with central banks maintaining a focus on price stability and governments pursuing structural reforms and sustainable public finances. The BIS highlights key vulnerabilities including greater economic fragmentation and protectionism alongside long-running declines in productivity growth, potential lasting effects from the post-pandemic inflation surge on household inflation expectations, and high and rising public debt that increases sensitivity to interest rate rises while constraining fiscal room to respond to shocks. A deep dive on global financial conditions finds tighter links between markets driven by the expansion of sovereign bond markets and a larger role for non-banks such as investment and hedge funds, supported by the growth of foreign exchange swap markets that facilitate cross-border investment with currency hedging; this increases the speed of international transmission of financial conditions and adds financial stability risks, underpinning a call to regulate similar risks with similar stringency. The BIS also released its Annual Report 2024/25 highlighting delivery against its Innovation BIS 2025 strategy, and noted that a special chapter on “The next-generation monetary and financial system” was released on 24 June.

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