There was also a warning that the pressure of higher borrowing costs could leave businesses and mortgage borrowers unable to cope and cause credit losses for banks and other lenders. “Therefore business models, trading strategies, that were predicated on that assumption (of rates coming down quickly), are particularly vulnerable to current conditions”. “The risk that inflation might turn out to be more stubborn than expected is something that we should not rule out,” Borio added. The assessment comes as global markets have largely shrugged off the collapse of a number of mid-sized US banks this year triggered by the sharp rise in rates, as well as the emergency takeover of Credit Suisse by UBS.īorio said that after years of predictability - when back-to-back crises pushed rates to sub-zero levels in some parts of the world, followed by rapid increases in the last 18 months - the directionality of central banks was no longer a given. “Clearly there are still some residual differences between what financial markets are seeing and the communication that has come from central banks,” Claudio Borio, the head of BIS’s monetary and economics unit, said as part of a quarterly report.

The possibility of inflation remaining stubbornly high and requiring major central banks such as the US Federal Reserve and European Central Bank to keep borrowing costs at their current elevated levels should not be underestimated, the BIS said.

London - The central bankers’ central bank, the Bank for International Settlements, has urged investors to hunker down for an extended spell of unpredictability in global interest rates, as well as rising pressures in the financial system.

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