"There's a lot of risk out there and yet asset prices are at all-time highs. We expect there will be an adjustment at some point," Breeden said in the interview published Thursday, declining to specify timing or magnitude of the expected decline.

Her comments come as the S&P 500 and Nasdaq Composite have set a series of all-time highs recently, despite mounting geopolitical tensions. The U.S. market has established multiple records, according to Investopedia, while President Trump extended the U.S.-Iran ceasefire by three weeks following White House meetings.

Breeden, who also serves as the Bank's head of financial stability, identified three specific risk clusters keeping her awake: potential macroeconomic shocks, private credit vulnerabilities, and AI valuation corrections. The private credit sector has expanded from "nothing to two-and-a-half trillion dollars in the last 15 to 20 years," she noted, warning the system remains untested at current scale and complexity.

"It's a private credit crunch, rather than a banking-driven credit crunch, that we're worried about," Breeden explained, referencing recent fund losses and investor withdrawal restrictions that have sparked broader financial system concerns.

The deputy governor's AI bubble warnings align with growing skepticism from tech leaders. Microsoft founder Bill Gates recently described current AI investment as "a frenzy" resembling the late-1990s dotcom bubble, when unproven startups attracted hundreds of billions before spectacular collapses. Technology firms have poured massive resources into AI infrastructure, prompting valuation concerns across the sector.

Nvidia CEO Jensen Huang, whose company supplies chips to major AI companies, has dismissed bubble comparisons. However, Breeden's institutional warning carries different weight — central banks rarely issue direct market predictions, preferring to influence through policy rather than public statements.

The UK's FTSE 100 sits within 5% of its own all-time high, though it lacks the AI giants driving U.S. market records. CNBC reported that markets are "counting the cost" of ongoing geopolitical tensions, with both Iran and the U.S. seizing ships as Trump ordered the Navy to "shoot and kill any boat" laying mines in shipping lanes.

"What we are watching for: is how might those prices fall? Will there be a sharp adjustment downwards?" Breeden said, emphasizing her role focuses on system resilience rather than market timing. "I'm not saying it will happen today, tomorrow, in 12 months' time. It's ensuring that if it happens the system is resilient."

The deputy governor's intervention represents a marked departure from typical central bank communication strategy. It is unusual for a senior figure at the Bank to be so forthright on market movements, as officials generally prefer to influence markets through policy adjustments rather than direct public warnings about valuations.

Her comments follow warnings from other central banks about persistent inflation risks. India's Reserve Bank Governor Sanjay Malhotra cautioned about inflation pressures from Middle East conflicts, while Bank of Canada Governor Tiff Macklem expects March inflation to remain elevated, according to the Wall Street Journal.