The Bank of England (BoE) has issued a warning about the potential for market volatility and economic repercussions due to policy uncertainty tied to upcoming elections in France and the United States.
In its latest financial stability report, the BoE highlighted concerns ahead of the French elections and the US presidential vote. While the report refrained from commenting on the upcoming UK election to avoid political bias, it emphasized the broader implications of global electoral uncertainties.
“Policy uncertainty associated with upcoming elections globally has increased,” the BoE stated. “This could make the global economic outlook less certain and lead to financial market volatility. It could also exacerbate existing sovereign debt pressures, geopolitical risks, and risks associated with global fragmentation, all of which are relevant to UK financial stability.”
The BoE, alongside other central banks, raised interest rates between late 2021 and last year to tackle soaring inflation. This led commercial lenders to increase home loan costs, putting pressure on consumer spending and worsening the cost-of-living crisis.
The BoE estimated that about three million UK households will face higher monthly mortgage repayments over the next two years as they renew their mortgage deals. “Many UK households, including renters, remain under pressure from higher living costs and higher interest rates,” the report added.
Last week, the BoE maintained its key interest rate at a 16-year high of 5.25 percent despite UK inflation returning to its 2 percent target. However, it is expected to cut borrowing costs at its next interest-rate meeting on August 1.