Middle East instability underlines risks, says BoE Governor Bailey

Key facts

• Bank of England Governor Andrew Bailey warned of increased financial stability risks due to renewed Middle East hostilities.
• ECB policymaker Martin Kocher stated that there are currently no second-round inflation effects from the conflict.
• Kocher indicated the ECB is closely monitoring indirect price effects and is prepared to use monetary policy if needed.
• Medium- and long-term inflation expectations in the euro area remain well anchored, according to Kocher.

Bank of England Governor Andrew Bailey has warned that renewed hostilities in the Middle East have increased financial stability risks. Meanwhile, European Central Bank policymaker Martin Kocher stated that while the ECB is closely monitoring indirect price effects from the conflict, it currently sees no second-round inflation effects. Kocher emphasized the high uncertainty surrounding the situation and affirmed the ECB's readiness to deploy monetary policy measures if necessary, noting that medium- and long-term inflation expectations remain well anchored.

Separately, outgoing Chancellor Rachel Reeves defended her economic record, citing reduced borrowing and increased investment, while cautioning about continued global economic shocks. The yield on 10-year UK government debt briefly surpassed 5% amid these concerns.