The head of the Bank of Canada warns new players in global debt markets aren’t as closely monitored as traditional banks, which could drive new risks in a period rife with uncertainty. Governor Tiff Macklem was in Toronto on Wednesday speaking to the Global Risk Institute about where he sees vulnerabilities in the financial system.
The United States’ and Israel’s attacks on Iran have increased volatility in financial and energy markets, he said in prepared remarks, particularly with a lack of clarity around how long the conflict could last.
He said later in a question-and-answer period that the energy price shock from the conflict will particularly affect countries that are oil and natural gas importers. Investors are also trading down riskier assets, he said.
The repricing in the market has been “relatively orderly” and doesn’t reflect dysfunction in the financial system, Macklem said. He also warned that the consequences of the conflict will be felt beyond stock values and commodity prices. “Markets do not capture the human cost of these conflicts and we can’t forget about that,” he said.
Macklem said geopolitical risks are high right now, compounded by trade uncertainty and risks around the rapid rise of artificial intelligence. He said equity and credit markets are seeing stretched valuations that raise the risk of “sharp reversals and increased volatility.”… Source: globalnews.ca
