Record of the Financial Policy Committee meeting on 26 June 2026
Vulnerabilities in risky asset valuations, sovereign debt markets, and risky credit markets, including in private credit, previously highlighted by the Financial Policy Committee (FPC) remain, and some have become more pronounced since the December 2025 Financial Stability Report (FSR). Notably, there has been a substantial increase in the use of leverage in equity markets.
Developments in the Middle East have affected the global risk environment materially. Despite this, the UK financial system has remained resilient and has continued to support the UK real economy, emphasising the benefits of the resilience that has been built.
Recent rapid advances in frontier Artificial Intelligence (AI) capabilities have increased financial stability risks related to cyber and operational resilience.
The conflict in the Middle East has resulted in a substantial negative supply shock to the global economy and triggered significant market reactions. Energy and some other commodity prices, as well as sovereign bond yields, have been volatile, initially rising sharply above pre-conflict levels. Market interest rates globally, including in the UK, have risen, thus tightening financial conditions. Meanwhile risky asset prices have reached high levels.
The signing of the Memorandum of Understanding between the US and Iran has led energy prices to fall back to just above pre-conflict levels, reducing near-term risks, and sovereign bond yields have also declined. However, substantial uncertainty remains and energy prices and interest rate markets have remained volatile.
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