Andrew Bailey: Muted response to Trump does not bring ‘assurance’
Bank of England governor Andrew Bailey said the “muted” market response to President Trump’s latest tariff threats did not bring any assurance over global financial stability.
Bailey on Tuesday morning suggested that President Trump’s tariffs on the UK and major European economies would not be a “trigger” for a financial breakdown.
During a Treasury Committee hearing, he said the range of geopolitical issues from the Far East to the High North were a “big consideration” for both domestic and global financial stability though single issues were unlikely to lead to an immediate meltdown.
However, Bailey said the “muted” response across markets was not a “source of any assurance”.
His response came as major stock indices in the UK and US fell by far smaller levels than after last year’s Liberation Day.
Gold prices jumped above £3,500 an ounce and the US dollar has only slightly weakened against the euro and the pound sterling, suggesting investors have not reached conclusions on whether Trump will launch a new trade war against major trading partners.
“The level of geopolitical uncertainty and the level of geopolitical issues is obviously a big consideration because they can have financial stability consequences,” Bailey, who is also the head of the global Financial Stability Board, said.
“Having said that, growth in the world economy was a lot more stable than we thought it would be.
“Market reactions have actually been more muted than we would have feared and expected.
“Overriding those points, I take neither of those as a point of assurance. We have to be very alert to these things.”
Bailey clashes with Trump
Bailey has become more vocal about the risks posed by Trump in recent weeks, also telling the Treasury Committee that attacks on the Federal Reserve’s independence could have “substantial scope for spillover” in the UK and other economies.
However, the governor, who is seen as the swing voter on the Monetary Policy Committee (MPC) when decisions on UK interest rates are made, said he did not find any threat to the Bank’s own independence in the context of British politics.
Reform UK deputy leader has suggested the party would add a Treasury representative to the MPC while the Green Party’s Zack Polanski has joined attacks against the Bank’s quantitative tightening programme.
Instead, when he was asked about general threats to central banks and financial stability, Bailey referred to his recent speech on the threats of “populism” to global stability as trade friction could “attribute unfavourable conditions to outside forces rather than to point to shared challenges”.