Paul Hannon

Doubts among investors about the sustainability of rising government debt could push global borrowing costs higher and cause volatility in financial markets, the Bank of England warned Friday.

Eurozone businesses became slightly less gloomy about their prospects in November, despite fresh uncertainty about trade with the U.S. following the election of Donald Trump as the next president.

The central bank said the prospect of higher tariffs increases the risk of rare but damaging shocks to the global economy and also warned of a potential asset-price bubble linked to the development of AI.

The European Central Bank is weighing the impact of higher U.S. tariffs on eurozone inflation, and appears likely to continue with a series of rate cuts that began in June and has picked up pace. 

Projected growth of 1.3% in 2025 is lower than previously forecast but could prove optimistic if exporters face higher U.S. tariffs.

The U.K. must be alert to opportunities to revive its trade with the European Union as it seeks to boost productivity and weak economic growth, Bank of England Governor Andrew Bailey said.

Jose Manuel Gonzalez-Paramo said criticism from political leaders can undermine central bank efforts to tame inflation even if the commentary stops short of government direction in setting interest rates.

Huw Pill warned that wages continue to rise rapidly, as do services prices, and at a pace that isn’t consistent with meeting the central bank’s inflation target over coming years.

Higher barriers to trade would have a negative impact on the global economy, and Europe must be prepared for increased tensions, Bank of Finland Governor Olli Rehn said.

The Bank of England is likely to lower its key interest rate on Thursday and at three further meetings next year before inflation settles at the central bank’s target, the National Institute of Economic and Social Research said.