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Investing.com -- The Bank of England (BoE) warned on Wednesday that risks to financial markets remain high despite an easing of tensions following the United States’ decision to pause implementing tariffs announced in April.
In its mid-year review of risks to financial stability, the Bank of England pointed to persistent threats stemming from geopolitical tensions, growing global trade and market fragmentation, and rising pressures on government debt.
The BoE’s Financial Policy Committee specifically cautioned about the risk of sharp falls in risky asset prices, abrupt shifts in asset allocation and a more prolonged breakdown in historical correlations.
While the central bank noted that Britain’s government bond market had functioned efficiently during market tension in April, it pointed out that the external stress was relatively short-lived.
"Conditions might have become more strained had the episode of volatility lasted longer," the BoE said.
On a positive note, the BoE stated that British households and businesses overall remained resilient.
It added that the domestic banking system was well positioned to continue lending even if there was a sharp economic deterioration.