## GLOBAL FINANCIAL STABILITY REPORT — Key Highlights (Infographic)

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**Canonical URL:** [GLOBAL FINANCIAL STABILITY REPORT — Key Highlights (Infographic)](https://www.imf.org/-/media/files/publications/gfsr/2022/october/english/infographic.pdf)

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### MACRO‑FINANCIAL BACKGROUND
- Global financial stability risks are rising amid historically high inflation and heightened uncertainty.
- Central banks are aggressively hiking rates to contain high inflation.
- Investors expect inflation to remain elevated (Probability of inflation outcomes over five years shown).
- The US dollar has appreciated sharply:
  - Against major advanced economies: Sep. 2021; Dec. 2021; Mar. 2022; Jun. 2022; Sep. 2022
  - Against emerging market economies (right scale): Sep. 2021; Dec. 2021; Mar. 2022; Jun. 2022; Sep. 2022

### KEY FINANCIAL STABILITY RISKS AHEAD
- Volatility and liquidity:
  - Interest rate volatility has risen exacerbated by low liquidity.
  - Volatility and liquidity (20-day moving average, index) plotted for Sep. 2021; Dec. 2021; Mar. 2022; Jun. 2022; Sep. 2022.
- Risk assets and returns (year to date, percent):
  - Risk assets total returns (year to date, percent) shown for Emerging market economies and Advanced economies.
  - Listed asset classes / regions referenced: Equities; Bonds; Emerging markets (EM); Europe; US; US high yield; EM local currency (USD); EM hard currency.
  - Example percent changes displayed: -10.6%; -23.5%.
  - Additional sequence displayed: 3533312927252321191715131197531 (Weeks from start of outflow episode).
- Emerging market sovereign spreads and borrowing costs:
  - Emerging market sovereign spreads (basis points) and Investment-grade sovereign spread and High-yield sovereign spread shown for Oct. 2021; Jan. 2022; Apr. 2022; Jul. 2022.
  - Lower-rated emerging markets are facing high borrowing costs.
- Emerging market bond funds have seen large outflows:
  - Emerging market bond outflow episodes (percent of assets under management, by cycle) listed for 2015; 2016; 2017; 2018; 2019; 2020; 2021; 2022.
  - Outflow magnitude axis shows 0, 5, 10, 15, 20, 25, 30, 35, 40, 45, 50, 100, 150, 200, 250, 300.
- Housing and spillovers:
  - Housing markets are at risk of declines in many economies.
  - China’s housing risks could spill over to its banking sector.
  - Sales of “presold” homes (percent) and Bank equity index (right scale) plotted for May 2019; May 2020; May 2021; May 2022.
- Regional pressures:
  - Spreads in certain euro area countries are rising.
  - Weighted average southern European spread (GDP weighted, basis points) and German yield (right scale, percent) plotted alongside ECB ad hoc meeting dates: Feb. 2020; Aug. 2020; Feb. 2021; Aug. 2021; Feb. 2022; Aug. 2022.

### DATA HIGHLIGHTS AND STRESS INDICATORS
- Global stress test finding:
  - Percent of bank assets below the 4.5% common equity Tier 1 ratio: 29; 3; 0; 5; 10; 15; 20; 25; 30 (values shown on infographic).
- Financial conditions:
  - Financial conditions index indicates Financial conditions have tightened in most economies (Easier — Tighter scale).
- Dollar and market movement timelines:
  - Dollar indices plotted with values including 90; 95; 100; 105; 110; 115; 120 and timeline points 15; 16; 17; 18; 19; 20; 21.
- Outflow episode timing and magnitudes:
  - Weeks from start of outflow episode axis: -16; -14; -12; -10; -8; -6; -4; -2; 0.
  - Additional plotted axes values include ranges: -60; -40; -20; 0; 20; 40; 60; 80; and -30; -25; -20; -15; -10; -5; 0; 5; 10; 15; 20; 25.
- Representative percentage markers:
  - Chart markers and labels include 0; 25; 50; 75; 100 and -1.0; -0.5; 0.0; 0.5; 1.0; 1.5; 2.0.

### POLICIES AND RECOMMENDATIONS
- Price stability is crucial for maintaining macro‑financial stability.
- A tightening in financial conditions is necessary to restore price stability.
- Central banks should:
  - Act resolutely to credibly bring inflation back to target and avoid a more painful and disruptive subsequent tightening.
  - Communicate clearly their policy function, their commitment to achieving their objectives, and the need to further normalize policy.
- Policymakers should:
  - Contain further buildup of financial vulnerabilities and adjust selected macroprudential tools as needed.
- Authorities in emerging and frontier markets should:
  - Reduce risks from high debt vulnerabilities and ensure adequate bank capital buffers.
- Authorities should:
  - Facilitate the efficient and orderly restructuring of distressed property developers in China.

*Sources: Bloomberg Finance L.P.; CEIC; EPFR; Fitch Connect; Haver Analytics; national data sources; S&P Capital IQ; and IMF staff calculations.*

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_Source: https://www.imf.org/-/media/files/publications/gfsr/2022/october/english/infographic.pdf_