The Bank of International Settlements issues stark warning on global growth

A “gathering storm” is set to threaten the global economy, the Bank of International Settlements (BIS) has warned.

In its latest quarterly report, the financial institution has warned that markets have lost faith in central banks and their policy reforms.

BIS chief Claudio Borio said that the “uneasy calm” of previous months is a sign that the global economy could be headed towards a financial apocalypse.

He said: “The tension between the markets’ tranquillity and the underlying economic vulnerabilities had to be resolved at some point. In the recent quarter, we may have been witnessing the beginning of its resolution.

“We may not be seeing isolated bolts from the blue, but the signs of a gathering storm that has been building for a long time.”

The report pointed out that investors all over the world aren’t confident about steps banks would take to prevent another financial crisis.

“Underlying some of the turbulence was market participants’ growing concern over the dwindling options for policy support in the face of the weakening growth outlook,” the report said.

“With fiscal space tight and structural policies largely dormant, central bank measures were seen to be approaching their limits.”

The report took into account major economic changes over the last three months including the interest rate hike by the US Federal Reserve in December, weak oil prices, and signs of a slowdown in China.

Official figures released last month show that the UK economy grew by 0.5% in the final quarter of 2015. However, a drop in business spending led to fears of a slowdown in the months ahead.