Press Briefing Transcript: Global Financial Stability Report, Annual Meetings 2025
IMF News, October 15, 2025
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- Published: October 15, 2025
Global market conditions and core vulnerabilities
- Financial conditions are described as "fairly easy across markets and across countries."
- Market performance year-to-date:
- Major advanced economies up "about 10 to 15 percent year-to-date."
- Emerging markets "about twice as much."
- Asset classes and signals:
- "Gold has rallied very strongly in response to high policy uncertainty."
- Markets recovered materially after an April selloff tied to tariff announcements.
- Three vulnerabilities highlighted in the GFSR:
- Asset prices are stretched and "vulnerable to readjustment in valuations."
- Interaction with nonbank financial institutions: an adjustment in asset prices could "impact nonbanks and could potentially lead to redemptions and further pressures on valuations."
- Rising longer-term bond yields in a number of countries, linked in part to fiscal concerns that "could then interact with banks and nonbanks."
- Valuation and sensitivity:
- Global equity valuations estimated at "about 10 percent over valuation."
- The report notes higher sensitivity of stretched valuations to adverse news; example: sizable two‑day drawdown after April tariff news was "quite large" though markets recovered.
Bond markets, term premia, and sovereign issuance
- Long-term yields and term premia:
- Term premia have "indeed been rising in recent years" and are "back to levels not seen since before the Global Financial Crisis, so about 20 years ago."
- Models show increases in the 10‑ to 30‑year spreads in multiple countries.
- Supply and future pressure:
- Link between net supply of bonds and future term premia is emphasized (reference to figure 1.12 in the GFSR).
- Projected net supply increases—driven by quantitative tightening and larger fiscal financing needs—may place further upward pressure on term premia in coming years.
- Emerging market financing:
- Financing conditions in emerging markets are described as "fairly easy"; many emerging markets have issued debt and outperformed advanced economy benchmarks by "a ratio of 2 to 1 on average."
- Relative spreads to benchmarks are "very tight" at the ten‑year level for many emerging markets.
Nonbank financial institutions and macrofinancial linkages
- Interconnectivity risks:
- The GFSR flags meaningful exposures: "about 40 percent of assets are in banks that have exposure to nonbanks that is above 100 percent of their capital level."
- Macroprudential emphasis:
- Continued use of macroprudential tools and a "macro‑overlay" is recommended to address a weak tail of institutions and systemically relevant interconnections.
- Global stress-testing coverage noted: update of a global stress test covering "about 800 institutions around the world in about 40 countries."
Frontier and emerging economies (including Sri Lanka, China, Nigeria, sub‑Saharan Africa)
- Frontier markets and Sri Lanka:
- Frontier economies benefit from easier global financial conditions and issuance this year; nevertheless, "now is not the time to be complacent."
- Policy priorities: improve economic fundamentals (current account, fiscal buffers), strengthen institutions, "improve the predictability of issuance," and further develop domestic debt markets to channel domestic savings.
- China:
- China growth described as "around 5 percent" this year; domestic consumption is weaker than the headline growth figure.
- Nigeria and sub‑Saharan Africa:
- Nigeria: inflation reduced from "more than 30 percent last year to 23 percent this year" and revenue collection and FX transparency have strengthened.
- Policy advice includes moving toward "more flexible exchange rates," continued revenue mobilization, debt management, and structural reforms.
- Caution that capital flow surges and retrenchments remain a risk for the region.
Country‑specific market concerns
- Japan:
- Recent political developments have coincided with "some weakness in the yen, higher yields."
- Yields have risen post‑pandemic consistent with higher inflation and policy adjustments; the 10‑ to 30‑year spread has increased, mirroring trends in other advanced economies.
- United Kingdom:
- Markets show higher volatility and higher yields relative to peers, attributed to "low productivity, sticky inflation" and uncertainty about fiscal plans.
- IMF recommendations: "credibility on the fiscal consolidation plan and reforms to increase productivity."
- France and European Monetary Union:
- Spread widening has been "fairly contained"; current repricing is viewed as linked to policy uncertainty rather than broad cross‑border spillovers like prior sovereign crises.
Foreign exchange, reserves, gold, and safe assets
- Dollar and FX dynamics:
- The dollar experienced appreciation followed by partial reversal; recent weaker dollar is "easing financial conditions in emerging markets."
- Fluctuations described as "fairly range bound" over longer horizons.
- Gold and reserves:
- Remarks note gold price commentary including "more than $4,000 per ounce."
- Official reserve allocations to gold have increased steadily over several years; reserve portfolios should be "well‑diversified."
- US dollar bonds remain a core safe asset benchmark due to "the depth and breadth of capital markets of US dollar assets."
- FX market importance:
- The GFSR contains a chapter on FX market structure and interactions; "FX matters a great deal" for cross‑market dynamics.
Crypto, stablecoins, and regulatory stance
- Stablecoins overview:
- Global stablecoin outstanding stock cited as "about 400 billion," with the "vast majority" denominated in US dollars.
- Regulatory developments:
- Legal and regulatory pathways are forming: US law (the Genius Act) provides a legal basis; the European Union and Japan have enacted or advanced regulations.
- IMF stance: welcomes steps toward regulation and references a policy framework for crypto‑assets published in February 2023.
- Policy priority: convergence toward robust regulation consistent with IMF recommendations while recognizing jurisdictional differences in implementation.
Regulatory framework, banking resilience, and policy recommendations
- Banking regulation:
- Ongoing work to finalize Basel III; some US rules had been "gold‑plated" relative to minimum standards and are under debate.
- The core banking system is considered "rather resilient" in part due to post‑crisis reforms.
- Principle: review any undue complexity to improve efficiency "without undermining the overall resilience of the banking sector or the international minimum standards."
- Macroprudential and fiscal recommendations:
- Strengthen fiscal frameworks and rebuild buffers to mitigate interactions between fiscal risk and financial markets.
- Promote development of domestic bond markets, derivatives and swap markets, and predictable issuance to channel domestic savings.
- Maintain central bank operational independence coupled with accountability (noted in reference to the Federal Reserve Act and mandates of price stability and full employment).
- Diversify official reserve portfolios and move toward more flexible exchange rates where appropriate.
- Address weak tails in banking systems and monitor bank exposure to nonbank sectors.
Press Briefing Transcript: Global Financial Stability Report, Annual Meetings 2025 — IMF Communications Department, October 14, 2025