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The Bank of International Settlements (BIS) cautioned highly indebted countries against acts that could lead to a loss of market confidence, such as advanced economies spending way above their means. It further warned that central banks must exercise caution when cutting rates and easing financial policies prematurely. Also read: Can Runes recover after the recent market correction?  While delivering the warning, the BIS failed to mention any nation. However, the umbrella body warned advanced economies against spending way above their means. BIS noted that nations should not run fiscal deficits that are higher than 1% of the GDP, a decline from last year’s 1.6%. That is a fraction of the current deficit for the United States, which the IMF said was way too large. “Heavily indebted countries can look just fine until suddenly they don’t, finance watchdog warns—’That is how markets work’..” The Bank for International Settlement called the U.S. deficit “much too large” “The Basel officials didn’t specify any country in particular, but they… https://t.co/s7vmKYrQq0 pic.twitter.com/OZsvSVOqSl — kristen shaughnessy (@kshaughnessy2) July 1, 2024 BIS gives way forward for indebted nations The report came a few months before the U.S. and other nations go to the polls, which are typically characterized by increased expenditures to garner votes. BIS’s head of the monetary and economic department, Claudio Borio, cautioned that nations with bloated fiscal positions and higher interest rates must try to perform urgent fiscal repairs. “We know from experience that things look sustainable until suddenly they no longer do, that is how markets work.” – Borio With these serious pressure points, the BIS clarified that central banks must exercise caution when cutting rates. The BIS highlighted that cutting rates too soon could prove quite costly to the central banks’ reputations if such financial policies have to be reversed amid inflation.…

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Filed under: News - @ July 4, 2024 6:16 am