{ "title": "Global Financial Stability Report, October 2023: Financial and Climate Policies for a High-Interest-Rate Era", "publication": "Global Financial Stability Report, October 2023", "sourceUrl": "https://www.imf.org/en/publications/gfsr/issues/2023/10/10/global-financial-stability-report-october-2023", "canonical": "https://www.imf.org/en/publications/gfsr/issues/2023/10/10/global-financial-stability-report-october-2023", "overlayPath": "/en/publications/gfsr/issues/2023/10/10/global-financial-stability-report-october-2023/index.md", "summary": "With core inflation still high in many advanced economies, central banks may need to keep monetary policy tighter for longer than is currently priced in markets. In emerging market economies, progress on lowering inflation appears to be more advanced, though there are discrepancies across regions.", "sections": [ { "heading": "Overall assessment and key highlights", "content": "- With core inflation still high in many advanced economies, central banks may need to keep monetary policy tighter for longer than is currently priced in markets.\n- In emerging market economies, progress on lowering inflation appears to be more advanced, though there are discrepancies across regions.\n- Optimism about a “soft landing” of the global economy has eased financial conditions since the April 2023 Global Financial Stability Report: stock markets have rallied, credit spreads have remained tight, and emerging market currencies have appreciated.\n- Upside surprises to the inflation outlook would challenge the soft-landing narrative, resulting in a potentially sharp repricing of assets.\n- Acute stress in the global banking system has subsided, but a weak tail of banks remains in some countries.\n- The global credit cycle has started to turn as borrowers’ debt repayment capacity diminishes and credit growth slows.\n- Risks to global growth are skewed to the downside, similar to the assessment in April.\n\nKey deliverables on the page: Full Report, Executive Summary, Foreword, Press Conference, Blog by IMF's Financial Counsellor Tobias Adrian, Chapters and Data, Videos." }, { "heading": "Chapter 1 — Soft Landing or Abrupt Awakening?", "content": "- Main finding: Risks to global growth remain skewed to the downside; cracks in the financial system may become worrisome fault lines if the market-expected soft landing does not materialize.\n- Inflation and monetary policy:\n - Core inflation still high in many advanced economies; central banks may need to keep policy tighter for longer than priced in markets.\n - Emerging market economies show more advanced progress on lowering inflation, with regional discrepancies.\n- Financial market reaction since April 2023:\n - Stock markets have rallied.\n - Credit spreads have remained tight.\n - Emerging market currencies have appreciated.\n- Risk channel: Upside surprises to inflation could trigger a sharp repricing of assets, testing financial-system resilience.\n- Ancillary content: Blog by Tobias Adrian; Chapter 1 Data." }, { "heading": "Chapter 2 — A New Look at Global Banking Vulnerabilities", "content": "- Scope: Fresh assessment of vulnerabilities in a higher-for-longer environment using an enhanced global stress test and newly developed market-based indicators.\n- Stress-test findings:\n - The enhanced global stress test uncovers many banks in advanced economies with the potential for significant capital losses, driven by marking-to-market securities and provisioning for loan losses.\n- Market-based indicators:\n - Indicators point to a substantial group of smaller banks at risk in the United States.\n - Risks are increasing in Asia, China, and Europe.\n- Policy recommendations:\n - Policy makers should sharpen their risk assessments.\n - Increase the severity of stress tests.\n - Increase capital held against interest rate risks.\n - Banks should ensure they are prepared to access central bank facilities in times of stress.\n- Ancillary content: Blog by IMF Staff; Online Annexes." }, { "heading": "Chapter 3 — Financial Sector Policies to Unlock Private Climate Finance in EMDEs", "content": "- Core problem: The private sector will have to cover a major share of the large climate mitigation investment needs in emerging market and developing economies (EMDEs).\n- Obstacles to private climate finance in EMDEs:\n - Often low credit rating, limiting the potential investor base.\n - Climate policies of major banks and insurance companies are not yet aligned with net zero emission targets.\n - Despite growth in sustainable investment funds, a small share of invested money is dedicated to creating a positive climate impact.\n - Political hurdles to implementing carbon pricing and EMDE-specific challenges.\n- Policy mix required:\n - Structural policies to lower the cost of capital, mobilize domestic financial resources, and improve credit ratings in EMDEs.\n - Financial sector policies that refocus on creating climate impact and consider EMDE-specific circumstances.\n - In low-income countries, additional international support and policy initiative will be needed.\n - The IMF Resilience and Sustainability Facility can support reforms to help create an enabling investment environment and attract private capital.\n- Ancillary content: Panel Discussion; Chapter 3 Data." }, { "heading": "Multimedia and events listed", "content": "- IMF Financial Counsellor Tobias Adrian on the October 2023 Global Financial Stability Report — October 10, 2023 — 2:43\n- Press Briefing: Global Financial Stability Report, October 2023 — 44:22\n- Unlocking Private Climate Finance for Emerging Market and Developing Economies — October 2, 2023 — 1:01:13\n\nSource: Global Financial Stability Report, October 2023: Financial and Climate Policies for a High-Interest-Rate Era\n\n---\n\n Content in this bundle\n\n- Chapter 1 Data\n - Chapter 1 Data (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Chapter 1 Data (XLSX){rel=\"external\" type=\"application/vnd.openxmlformats-officedocument.spreadsheetml.sheet\"}\n- Chapter 3 Data\n - Chapter 3 Data (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Chapter 3 Data (XLSX){rel=\"external\" type=\"application/vnd.openxmlformats-officedocument.spreadsheetml.sheet\"}\n- Chapter 1\n - Chapter 1 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Chapter 1 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Chapter 2\n - Chapter 2 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Chapter 2 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Chapter 2 Online Annex\n - Chapter 2 Online Annex (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Chapter 2 Online Annex (PDF){rel=\"external\" type=\"application/pdf\"}\n- Chapter 3\n - Chapter 3 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Chapter 3 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Chapter 3 Online Annex\n - Chapter 3 Online Annex (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Chapter 3 Online Annex (PDF){rel=\"external\" type=\"application/pdf\"}\n- Executive Summary\n - Executive Summary (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Executive Summary (PDF){rel=\"external\" type=\"application/pdf\"}\n- Foreword\n - Foreword (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Foreword (PDF){rel=\"external\" type=\"application/pdf\"}\n- GLOBAL FINANCIAL STABILITY REPORT — Key Highlights 2023 OCT — Soft landing or abrupt awakening\n - GLOBAL FINANCIAL STABILITY REPORT — Key Highlights 2023 OCT — Soft landing or abrupt awakening (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - GLOBAL FINANCIAL STABILITY REPORT — Key Highlights 2023 OCT — Soft landing or abrupt awakening (PDF){rel=\"external\" type=\"application/pdf\"}\n- Full Report\n - Full Report (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Full Report (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- Press Conference\n- Blog by IMF's Financial Counsellor Tobias Adrian\n- Blog by IMF Staff\n- Blog by IMF Staff\n- Panel Discussion\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/publications/gfsr/issues/2023/10/10/global-financial-stability-report-october-2023" } ], "bullets": [ "[Markdown version](/en/publications/gfsr/issues/2023/10/10/global-financial-stability-report-october-2023/index.md)", "[Structured JSON version](/en/publications/gfsr/issues/2023/10/10/global-financial-stability-report-october-2023/index.json)", "[Bundle manifest](/en/publications/gfsr/issues/2023/10/10/global-financial-stability-report-october-2023/bundle-manifest.json)", "Published: October 10, 2023", "With core inflation still high in many advanced economies, central banks may need to keep monetary policy tighter for longer than is currently priced in markets.", "In emerging market economies, progress on lowering inflation appears to be more advanced, though there are discrepancies across regions.", "Optimism about a “soft landing” of the global economy has eased financial conditions since the April 2023 Global Financial Stability Report: stock markets have rallied, credit spreads have remained tight, and emerging market currencies have appreciated.", "Upside surprises to the inflation outlook would challenge the soft-landing narrative, resulting in a potentially sharp repricing of assets.", "Acute stress in the global banking system has subsided, but a weak tail of banks remains in some countries.", "The global credit cycle has started to turn as borrowers’ debt repayment capacity diminishes and credit growth slows.", "Risks to global growth are skewed to the downside, similar to the assessment in April.", "Main finding: Risks to global growth remain skewed to the downside; cracks in the financial system may become worrisome fault lines if the market-expected soft landing does not materialize.", "Inflation and monetary policy:", "Financial market reaction since April 2023:", "Risk channel: Upside surprises to inflation could trigger a sharp repricing of assets, testing financial-system resilience.", "Ancillary content: Blog by Tobias Adrian; Chapter 1 Data.", "Scope: Fresh assessment of vulnerabilities in a higher-for-longer environment using an enhanced global stress test and newly developed market-based indicators.", "Stress-test findings:", "Market-based indicators:", "Policy recommendations:", "Ancillary content: Blog by IMF Staff; Online Annexes.", "Core problem: The private sector will have to cover a major share of the large climate mitigation investment needs in emerging market and developing economies (EMDEs).", "Obstacles to private climate finance in EMDEs:", "Policy mix required:", "Ancillary content: Panel Discussion; Chapter 3 Data.", "IMF Financial Counsellor Tobias Adrian on the October 2023 Global Financial Stability Report — October 10, 2023 — 2:43", "Press Briefing: Global Financial Stability Report, October 2023 — 44:22", "Unlocking Private Climate Finance for Emerging Market and Developing Economies — October 2, 2023 — 1:01:13", "**Chapter 1 Data**", "**Chapter 3 Data**", "**Chapter 1**", "**Chapter 2**", "**Chapter 2 Online Annex**", "**Chapter 3**", "**Chapter 3 Online Annex**", "**Executive Summary**", "**Foreword**", "**GLOBAL FINANCIAL STABILITY REPORT — Key Highlights 2023 OCT — Soft landing or abrupt awakening**", "**Full Report**", "[Press Conference](https://www.imf.org/en/Videos/view?vid=6338781869112)", "[Blog by IMF's Financial Counsellor Tobias Adrian](https://www.imf.org/en/Blogs/Articles/2023/10/10/higher-for-longer-interest-rate-environment-is-squeezing-more-borrowers)", "[Blog by IMF Staff](https://www.imf.org/en/Blogs/Articles/2023/10/16/new-look-at-global-banks-highlights-risks-from-higher-for-longer-interest-rates)", "[Blog by IMF Staff](https://www.imf.org/en/Blogs/Articles/2023/10/02/emerging-economies-need-much-more-private-financing-for-climate-transition)", "[Panel Discussion](https://www.imf.org/en/Videos/view?vid=6338267885112)" ], "related": [ { "title": "Chapter 1 Data", "role": "dataset", "sourceUrl": "https://www.imf.org/-/media/files/publications/gfsr/2023/october/data/ch1data.xlsx", "summary": { "path": "/-/media/files/publications/gfsr/2023/october/data/ch1data.xlsx.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/gfsr/2023/october/data/ch1data.xlsx", "mime": "application/vnd.openxmlformats-officedocument.spreadsheetml.sheet" } }, { "title": "Chapter 3 Data", "role": 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