Hernández de Cos warns of inflation and debt risks
Pablo Hernández de Cos, General Manager of the Bank for International Settlements (BIS), warns that prolonged energy pressures, high public debt and opaque AI financing leave the global economy vulnerable. He says central banks must remain data-dependent.
Energy pressure without second rounds
Ten months into the Iran war, Hernández de Cos said energy prices had not triggered second-round wage and price effects, but inflation risks remained.
He distinguished current conditions from post-pandemic inflation of 8–10 percent in many industrialised countries: rates are now higher and pressures mainly reflect energy.
He advocated temporary, targeted support for vulnerable groups, alongside renewables and diversified supplies.
High deficits and rising debt-service costs threaten fiscal sustainability; AI-led growth remains uncertain and displaced workers may need support.
He called for structural reforms and credible fiscal plans.
Central banks would raise rates if the data showed risks to price stability, rather than act automatically.
AI financing grows more opaque
BIS analysis finds AI investment increasingly financed through long-term debt, complex off-balance-sheet structures and circular investments between AI companies.
Hernández de Cos called for close monitoring.
A correction would reduce wealth, spending and AI investment, but its scale remains uncertain.
Unlike 2008, banks are more resilient following Basel Committee reforms.
He said adequate capital protects deposits and sustains lending during recessions; extending resilience to leveraged non-banks remains a challenge.
Basel stays, construction remains undecided
The BIS has around 1,200 staff, welcomes nearly 10,000 visitors annually and hosted 180 events in 2025.
Hernández de Cos reaffirmed its Basel base, but no final decision exists on a second campus building.
Design work runs until early 2028; the planning-permission consultation begins in November 2026.
Source: Inflation risks, public debt, AI and BIS Campus
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