World economy faces pivotal moment, central bank bodyBISsays

Trade tensions and fractious geopolitics risk exposing deep fault lines in the global financial system, the central bank umbrella body, Bank for International Settlements, said in its latest assessment of the state of the world economy.The outgoing head of the BIS, often dubbed the central bankers’ central bank, Agustín Carstens, said the US-driven trade war and other policy shifts were fraying the long-established economic order.He said the global economy was at a “pivotal moment,” entering a “new era of heightened uncertainty and unpredictability,” which was testing public trust in institutions, including central banks.The bank’s report is published just over a week before President Trump’s trade tariff deadline of July 9 and comes after six months of intense geopolitical upheaval.When asked about Trump’s criticisms of Federal Reserve Jerome Powell, which have included Trump labeling the Fed chair as “stupid,” he was not overly critical.“It is to be expected at certain points in time that there will be friction,” former Mexican central bank governor Carstens told reporters, referring to the relationship between governments and central banks.“It is almost by design.”The BIS’ annual report, published on Sunday, is viewed as an important gauge of central bankers’ thinking given the Switzerland-based forum’s regular meetings of top policymakers.Rising protectionism and trade fragmentation were “particular concerning” as they were exacerbating the already decades-long decline in economic and productivity growth, Carstens said.There is also evidence that the world economy is becoming less resilient to shocks, with population aging, climate change, geopolitics and supply chain issues all contributing to a more volatile environment.The post-COVID spike in inflation seems to have had a lasting impact on the public’s perception about price moves too, a study in the report showed.High and rising public debt levels are increasing ...