BOE: Higher Long-term Rates Pose System Risks - FPC

Rising long-term interest rates and the outlook for higher-for-longer central bank policy rates both pose systemic stress risks for parts of the global banking system, according to the BOE's latest financial policy summary.

• According to the FPS, parts of the global banking system and financial markets "remain vulnerable to stress from increased rates and are subject to significant uncertainty".
• The uncertainty also reflects risk from the growth and inflation outlook and geopolitical tensions, the FSR said.
• Digging down, the FPC minutes, within the FSR, outlined some risk that further policy shifts from the BOJ could trigger larger or more volatile price adjustments than seen in the recent YCC tweak.
• One concern could be a reallocation of Japanese investor bond portfolios and significant losses on their domestic bond holdings, the BOE FPC noted.