BIS central bankers’ speeches  1  According to standard measures of financial market volatility, such as the VIX, or implied volatilities from options prices in other asset classes, the current environment does not appear to be particularly uncertain. 3 In fact, many of these measures are at post-crisis lows. The comfort offered by these market-based measures may be misleading.
For one, they may be importantly influenced by the extraordinary liquidity provided by central banks. This liquidity has supported financial markets and thereby provided insurance against downside risks. The dampening effect of central bank action may not persist if economic fundamentals do not ultimately improve, meaning that there could be a discontinuous shift in volatility at some point in the future.