BIS chief warns Iran war fiscal stimulus risks worsening inflation across economies
Bank for International Settlements general manager Agustín Carstens warned that governments responding to the Iran war energy shock with fiscal expansion risks reigniting inflation. He said Asian economies should be especially cautious.
In an interview with Nikkei Asia, Carstens said the credibility central banks have built over the last three years could be eroded by a fiscal response to the energy shock. The BIS estimates a 15-20% rise in global oil prices could add 0.7 percentage points to headline inflation.
The risk is sharper for Asian economies. Indonesia, Thailand and the Philippines are net energy importers. Carstens said targeted support could stabilise consumer prices, while broad-based subsidies would complicate monetary policy. India's and China's strategic petroleum reserves are on the table as alternatives.
The BIS chief said productivity gains from artificial intelligence could ease inflation in the medium term. In the short term, however, he urged central banks to follow the data and stretch their rate-cut timetables. Asian central banks will firm up a joint stance at the BIS meeting in June.
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