The International Monetary Fund (IMF) has issued a warning in its latest Global Financial Stability Report, cautioning that risks to global financial stability remain “elevated” despite a semblance of calm in the markets.

The report, titled “Shifting Ground beneath the Calm,” states that investors appear complacent, with risk asset valuations returning to stretched levels that are well above economic fundamentals. Key risks cited by the IMF include:

Growing pressure in sovereign bond markets due to widening fiscal deficits.

Increased interconnectedness between banks and highly leveraged nonbank financial institutions (NBFIs), which could amplify shocks.

Vulnerability in the global foreign exchange market amplified by macro financial uncertainty and currency mismatches.

The IMF calls for policymakers to strengthen foundational market infrastructure and enhance sovereign debt management, especially in emerging markets, to bolster resilience against future shocks.

Source: Global Financial Stability Report, October 2025 (IMF)