Bank for International Settlements warns of rising debt and AI‑driven financial fragility

The Bank for International Settlements (BIS) said its Annual Economic Report highlights a growing mix of global risks. Record‑high public debt, strained fiscal positions and lingering supply‑chain shocks are raising inflation pressures and could trigger sharper drops in sovereign bond values.

The report also flags uncertainty around the rapid surge in investment tied to artificial intelligence. While AI is boosting confidence and expected productivity gains, the BIS warns it may fuel job anxieties, supply bottlenecks and over‑investment, creating new financial‑stability links that rely heavily on debt and non‑bank intermediaries.

Policymakers are urged to act decisively, coordinating fiscal and monetary measures, reinforcing price stability, ensuring fiscal sustainability and strengthening oversight beyond the banking sector. The BIS noted the recent US‑Iran ceasefire and the reopening of the Strait of Hormuz as positive developments that reduce the risk of extreme oil‑market scenarios.