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UPDATE 1-Markets could face sharp correction, Bank of England warns

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LONDON, Oct 8 (Reuters) – The high value of financial assets could correct sharply if investors reassess the prospects for the economy’s recovery from COVID-19 and there are signs of increased risk-taking at investment banks, the Bank of England said on Friday.

The BoE’s Financial Policy Committee (FPC) said in a statement after its October meeting that there was still evidence of elevated risk-taking in a number of financial markets relative to historic levels.

Stock indexes have hit record highs in recent months as investors bet on a strong recovery after the pandemic, but more recently inflation has become a worry and growth has become patchier in the face of supply side bottlenecks.

Households in Britain and beyond are facing an additional squeeze on their spending power from a surge in energy prices.

“Asset valuations could correct sharply if, for example, market participants re‐evaluate the prospects for growth,…

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