World economy faces 'pivotal moment' as uncertainty looms

Trade tensions and fractious geopolitics risk exposing deep fault lines in the global financial system, central bank umbrella body the Bank for International Settlements, said in its latest assessment of the state of the world economy.

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Outgoing head of the BIS, often dubbed the central bankers’ central bank, Agustin Carstens, said the US-driven trade war and other policy shifts were fraying the long-established economic order.

He said the global economy was at a “pivotal moment”, entering a “new era of heightened uncertainty and unpredictability”, which was testing public trust in institutions, including central banks.

The bank’s report is published just over a week before US President Donald Trump's trade tariff deadline of July 9 and comes after six months of intense geopolitical upheaval.

When asked about Trump's criticisms of US Federal Reserve Jerome Powell, which have included Trump labelling the Fed chair as “stupid”, he was not overly critical.

“It is to be expected at certain points in time that there will be friction,” former Mexican central bank governor Carstens told reporters, referring to the relationship between governments and central banks. “It is almost by design”.

The BIS’ annual report, published on Sunday, is viewed as an important gauge of central bankers’ thinking given the Switzerland-based forum's regular meetings of top policymakers.