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BOE: Physical commodity markets could be risk to financial stability

UK
(MNI) London

The BOE noted significant risks associated with the global commodity market in the July FSR as the Russian invasion of Ukraine continued to generate substantial energy price shocks.

  • These are notably not limited to financial markets, but physical markets and as such the wider economy. This inter-linkage sees a feedback loop between squeezes on real commodities funnel back into credit crunches in the financial sector.
  • Commodity markets have remained functional, however the risk of disruption remains eminent as no upper bound exists for commodity prices. Banks have sufficient capital, and again the key risks stem from the magnification of greater macro shocks.
  • The Bank emphasized that the FSB, central bank's global CB co-ordination body,  continues to take an in-depth analysis of vulnerabilities affecting commodity markets.
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The BOE noted significant risks associated with the global commodity market in the July FSR as the Russian invasion of Ukraine continued to generate substantial energy price shocks.

  • These are notably not limited to financial markets, but physical markets and as such the wider economy. This inter-linkage sees a feedback loop between squeezes on real commodities funnel back into credit crunches in the financial sector.
  • Commodity markets have remained functional, however the risk of disruption remains eminent as no upper bound exists for commodity prices. Banks have sufficient capital, and again the key risks stem from the magnification of greater macro shocks.
  • The Bank emphasized that the FSB, central bank's global CB co-ordination body,  continues to take an in-depth analysis of vulnerabilities affecting commodity markets.