Craig Stirling

Sun, Jun 29, 2025, 3:35 AM4 min read

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Resurgent US inflation could unfold as the world economy reels from Donald Trump’s disruptive trade policies, the Bank for International Settlements warned.

That bleak scenario was described by General Manager Agustin Carstens, presenting an annual report that catalogued how existing global vulnerabilities have been further exposed by the American president’s actions since taking office in January.

“We were meant to have a soft landing — everything was going according to plan,” the former Mexican central-bank chief told reporters. “Then we had this very substantive period of volatility with the threat that tariffs would make more difficult convergence towards 2% in some countries.”

The final report of Carstens’ term in office, published Sunday, details a backdrop of economic uncertainty at “levels typically associated with crises,” driven by higher import levies imposed by the White House, albeit limited for now during a 90-day hiatus.

Growth prospects have diminished while risks have intensified with regard to the stability of consumer prices, public finances and the financial system, the BIS said.

Facing such challenges, the Basel officials counsel central banks to stay focused on core missions in order to preserve and foster trust, and to enhance the effectiveness of their actions.

Carstens highlighted how the Federal Reserve may encounter an especially hard time in the current environment. Chair Jerome Powell is steadfastly resisting White House pressure to cut interest rates.

“In the US, you could face a very difficult scenario for the central bank, which is when you have higher inflationary pressures or deviating inflationary expectations and a slowdown in the economy,” he said. “That is a circumstance that central banks usually find particularly difficult.”

In a speech to central bankers on Sunday, Carstens highlighted how it’s not just monetary officials who have a responsibility to foster credibility in economic management.

“Trust cannot stop at monetary policy and the door of the central bank,” he said. “It must extend to every aspect of public policy. People must trust that policymakers and elected officials will act to advance legitimate objectives and will do so effectively.”