IMF Flags Rising Financial Risks Amid Geopolitical Tensions

The International Monetary Fund highlights potential risks in global financial markets due to geopolitical tensions and policy uncertainties. Monetary easing might lead to asset bubbles and increased debt, while geopolitical conflicts and forthcoming elections add to market volatility. The rise of AI in finance also poses operational risks.

The International Monetary Fund has issued a warning on potential financial risks heightened by ongoing geopolitical tensions and looming elections. While immediate global financial risks appear contained, the IMF cautions that current monetary policies might create asset price bubbles, underestimating the risks from military conflicts and elections.

In its Global Financial Stability Report, the IMF highlights a disconnect between high geopolitical uncertainty and market stability, suggesting an increased likelihood of sudden market shocks. Credit and equity markets remain optimistic despite slowing earnings growth and fragility in corporate and commercial real estate sectors.

Amid such uncertainties, the IMF stresses the importance of gradual interest rate changes and better regulation of bank and non-bank financial activities. Additionally, the rise of artificial intelligence in financial sectors is noted for potential efficiency gains as well as contributing to market volatility and operational challenges.

(With inputs from agencies.)