The Bank of England (BoE) has raised concerns about the potential economic risks linked to upcoming elections in France and the United States, noting that policy uncertainty could lead to market volatility and other economic disruptions.
This warning was issued on Thursday as part of the BoE’s half-yearly financial stability report.
The BoE’s forecast comes just before the first round of a snap French election on Sunday and ahead of the US presidential vote in November. While Britons are also heading to the polls on July 4, the BoE refrained from commenting specifically on that election to avoid any appearance of political bias.
“Policy uncertainty associated with upcoming elections globally has increased,” the bank stated. “This could make the global economic outlook less certain and lead to financial market volatility.
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, along with other central banks, has been increasing interest rates since late 2021 to combat rising inflation.
This has led commercial retail lenders to raise the cost of home loans, which has, in turn, impacted consumer spending and exacerbated the cost-of-living crisis.
The BoE estimated that around three million UK households will face higher monthly mortgage repayments over the next two years as they seek to renew their mortgage deals.
“Many UK households, including renters, remain under pressure from higher living costs and higher interest rates,” the bank added.
Last week, the BoE maintained its key interest rate at a 16-year high of 5.25 percent, despite UK inflation returning to its two percent target.
However, it is anticipated that the BoE may reduce borrowing costs at its next interest-rate meeting on August 1.
