LONDON: Policy uncertainty linked to upcoming elections in France and the United States has increased the risk of market volatility and other economic fallout, the Bank of England warned Thursday.
The BoE forecast, contained in the central bank’s half-yearly financial stability report, comes ahead of the first round of a snap French election Sunday and a US presidential vote in November.
Britons meanwhile go to the polls on July 4, with the BoE refraining from specific comment on that election to avoid political bias.
“Policy uncertainty associated with upcoming elections globally has increased,” the bank said.
“This could make the global economic outlook less certain and lead to financial market volatility.
Bank of England keeps rates at 5.25% ahead of UK election
“It could also increase existing sovereign debt pressures, geopolitical risks, and risks associated with global fragmentation, all of which are relevant to UK financial stability,” the BoE added.
The Bank of England joined peers in ramping up interest rates between late 2021 and last year to combat soaring inflation.
That forced commercial retail lenders to hike the cost of home loans, weighing on consumer spending and worsening a cost-of-living crisis.
About three million UK households will suffer increases to monthly mortgage repayments over the next two years as they look to renew mortgage deals, the BoE estimated Thursday.
“Many UK households, including renters, remain under pressure from higher living costs and higher interest rates,” it added.
The BoE last week held its key interest rate at a 16-year high of 5.25 percent despite UK inflation returning to its two percent target.
It is forecast to cut borrowing costs, however, at its next interest-rate meeting on August 1.
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