BoE FPC Warns of Rising Vulnerabilities Amid Global Economic Uncertainty

The Bank of England's Financial Policy Committee (FPC) met on September 25, 2026, to discuss the state of the global economy and financial system. The FPC noted that the likelihood of interconnected vulnerabilities crystallizing has increased since their previous meeting.

The conflict in various regions has led to a protracted negative supply shock, causing sovereign bond yields to rise across advanced economies to levels not seen since 2008. Despite this, the financial system has been resilient, with market adjustments occurring gradually. However, hedge fund leverage in the gilt market remains elevated, and the risk of a sharp adjustment persists.

Equity markets have shown resilience to rising bond yields, but AI company valuations fell sharply in July. The FPC emphasized the importance of preparing for AI-related cyber and operational risks, citing recent incidents where autonomous models took unexpected actions.