UK BOE Financial Stability Report

Risks to financial stability have increased during 2025. Global risks remain elevated and material uncertainty in the global macroeconomic outlook persists. Key sources of risk include geopolitical tensions, fragmentation of trade and financial markets, and pressures on sovereign debt markets. Elevated geopolitical tensions increase the likelihood of cyberattacks and other operational disruptions. In the FPC’s judgement, many risky asset valuations remain materially stretched, particularly for technology companies focused on ...

Global risks associated with geopolitical tensions, global fragmentation (reduced co-operation on trade and international policy) and pressures on government debt levels remain material. Uncertainty around, and risks to, the global economic outlook have increased. As the UK is an economy with a large financial sector and in which trade is significant, these risks are particularly relevant to UK financial stability. Geopolitical tensions also increase the risk of cyber-attacks. The FPC encourages efforts to build national and ...

Risks to the UK financial system are broadly unchanged since Q1. But some asset prices have continued to rise and the risk of a sharp correction persists. The risk environment is broadly unchanged since Q1 2024. The prices of many assets such as shares and bonds remain high relative to historical norms, and some have continued to rise. This suggests that investors in financial markets are continuing to expect the economy to recover and inflation to fall. They are placing less weight on risks, such as geopolitical developments or ...

The outlook for global economic growth remains subdued. A number of risks could weaken growth further, including persistent inflation, higher interest rates, and increased geopolitical tensions. Currently, financial markets are not expecting further increases in Bank Rate; although interest rates will likely need to stay high for some time to make sure inflation continues to fall. Interest rates on longer-term government bonds are back to where they were before the global financial crisis. These interest rates act as a benchmark for ...

The Financial Policy Committee (FPC) works to ensure the UK has a stable financial system. A stable financial system enables households and businesses to make payments, manage their savings, borrow money, and guard against risks. It can withstand shocks rather than make them worse. The FPC identifies vulnerabilities and acts to build the resilience of the system. In recent months, interest rates have continued to increase as central banks around the world act to tackle inflation. Since December 2021, the Bank of England interest rate ...

Since our July Financial Stability Report (FSR), the outlook for growth and unemployment in the UK and globally has deteriorated further. Prices have continued to rise rapidly, in considerable part reflecting steep increases in energy and food prices. In response to these price rises, central banks around the world, including the Bank of England, have been increasing interest rates. These rate rises, and the expectation that they will rise further, have caused the cost of borrowing to rise for households and businesses. There have ...

Prices of essential goods such as food and energy have risen sharply in the UK and globally, and the outlook for growth has worsened. This is largely a result of Russia’s illegal invasion of Ukraine. Like other central banks around the world, we have increased interest rates to help slow down price increases. Markets have been volatile and financing conditions have tightened. These higher prices, weaker growth and tighter financing conditions will make it harder for households and businesses to repay or refinance debt. Given this, we ...