Bank for International Settlements warns of global debt, inflation and AI risks

The Bank for International Settlements (BIS) issued its annual economic report warning that the world economy faces a growing mix of risks. It identifies four main pressures: high public debt, financial‑market vulnerabilities, a resurgence of inflationary pressures and uncertainty linked to the rapid expansion of artificial‑intelligence investment.

BIS chief executive Pablo Hernández de Cos said, "Policies must support each other to avoid additional pressure on the world economy. In the end, success depends on a solid fiscal and financial base." He urged coordinated fiscal and monetary action and warned central banks should be ready to intervene if inflation expectations become entrenched. The report also cautioned that AI‑driven investment, while boosting productivity expectations, could lead to over‑investment, labour‑market disruptions and heightened competition, creating new financial‑stability challenges. Geopolitical developments such as the US‑Iran armistice and the reopening of the Strait of Hormuz were noted as reducing, but not eliminating, oil‑market risks.