Latest news with #Andrew Bailey
Yahoo
4 days ago
- Business
- Yahoo
Bank of England governor warns tariff hikes risk 'fragmenting the world economy'
Bank of England (BoE) governor Andrew Bailey believes "tariffs creates the risk of fragmenting the world economy" and weighing on activity. Referring to Donald Trump's trade policies, Bailey made the comments in a pre-prepared speech shared ahead of the annual Financial and Professional Services Dinner at Mansion House. Chancellor Rachel Reeves is also due to make a speech at the dinner on Tuesday. "To say that the state of the global economy and the impact of tariff announcements is in the news and significant is an understatement," Bailey said. "The shifts we have witnessed — and continue to witness — mark a generational change in the system of trade amongst nations." He said: "Recent events have exposed fault lines in the multilateral system of relations between nations, including in the global trading system, and a perceived failure to deal with what are seen as persistent global imbalances." The BoE governor explains that these trade imbalances are expected to self-correct over time, if the global economic system is working efficiently. Bailey highlights the examples of China and the US, which between them, account for nearly 40% of the world's current account imbalances. A country's current account balance of payments is a measure of its international transactions with the rest of the world, tracking the flow of goods, services and income. Bailey said that China has a current account surplus of 2.3% of national gross domestic product (GDP) and 0.4% of global GDP, according to IMF data. A current account surplus is when a country is exporting a greater value of goods than it is importing. "It appears that the surplus primarily reflects the weakness of domestic consumption in China, which in turn reflects an investment and export-led growth strategy and weaker social safety nets domestically," Bailey says. Read more: Rachel Reeves plans boost for savers with cash in low-interest accounts He said: "As Chinese incomes have increased, the self-correction mechanism has been weaker because the domestic incentives to save have remained strong". Meanwhile, the US has a current account deficit of 3.9% of national GDP and 1% of global GDP, meaning the value of its imports are higher than its exports. Bailey said he believes that there are two reasons why this trade dynamic has not self-corrected. One of which, he says, is that as a consequence of its stronger productivity and economic growth, "domestic wealth has risen and foreign capital has flowed into the US allowing it to run a larger external deficit, thus reducing the downward pressure on domestic demand." The second reason is that "people outside the US have been willing to take on its obligations — i.e. buy its assets". Bailey said that one of the key points from these examples, is that "the underlying drivers of imbalances are domestic macroeconomic policies". The other is that "the US does need to explain how it can regard its internal imbalance as sustainable and its external imbalance as not so, and how it envisages the internal balance responding to an adjustment of the external balance flowing from tariffs taking effect. And China needs to explain how it will tackle its persistently weak domestic consumption." Read more: Bank of England could cut interest rates faster if jobs market slows, Bailey says He added that the pressure to adjust these imbalances "can come more through threats of tariffs and trade barriers. But increasing tariffs creates the risk of fragmenting the world economy, and thereby reducing activity." "There is therefore a common interest globally in tackling excess imbalances before dangerous levels of trade restrictions come into play, and before we face the prospect of difficult adjustment with macroeconomic volatility and financial instability," he said. Markets have been rocked this year by Trump's fast-moving tariff agenda, with concerns that the US president's trade policies could tip the global economy into a recession. Data released on Tuesday showed that US inflation rose to 2.7% in June, up from 2.5% in May, as investors continued to look for signs that Trump's tariffs may be starting to work their way through to consumer wallets. Meanwhile, JPMorgan (JPM) CEO Jamie Dimon warned in the investment bank's latest earnings release on Tuesday that "significant risks persist — including from tariffs and trade uncertainty, worsening geopolitical conditions, high fiscal deficits and elevated asset prices." Trump announced sweeping tariffs on what he dubbed "Liberation Day" on 2 April but later announced a 90-day pause on many duties and has since added a further extension to this deadline to 1 August for countries to negotiate trade agreements. However, over the weekend, Trump has threatened the EU and Mexico with 30% tariffs and Canada with a 35% levy rate. In addition, on Monday, the US president also threatened Russia with "severe" tariffs if a deal is not reached to end the war with Ukraine within 50 days. Read more: How to make pension pots tax-efficient Stocks to watch this week: Goldman Sachs, Netflix, TSMC, ASML and Burberry Bitcoin price hits all-time high as 'crypto week' beginsSign in to access your portfolio
The Independent
4 days ago
- Business
- The Independent
‘Urgent' need for digital reform of banking payments, says Bank of England boss
Bank of England governor Andrew Bailey has said that 'urgent' reforms of retail banking payments should be a priority as he remains to be 'convinced' over the need for a digital pound. In his annual Mansion House dinner speech, Mr Bailey said the UK needs to 'harness the potential of digital technology for retail payments' both within Britain and internationally to help future-proof payments infrastructure and ensure it can play its part in boosting growth in the UK. But he added a dose of scepticism over any plans for a digital pound and reiterated concerns over so-called stablecoins – a type of cryptocurrency which is backed by a traditional asset such as a currency or commodity. Mr Bailey said: 'There is an urgent need for innovation now in the area of payments, and the opportunity is there, no doubt about that.' He said the Bank would collaborate with authorities and industry to 'design and deliver the next generation of UK retail payments infrastructure'. 'This must be a priority, both to replace ageing infrastructure and as part of promoting growth in the UK,' he said, echoing financial services reforms outlined by Chancellor Rachel Reeves on Tuesday to help boost the economy. Mr Bailey added: 'There may well be a role for stablecoins going forward, but I don't see them as a substitute for commercial bank money. 'Moreover, our job will be to ensure that those stablecoins that purport to be money are safe. 'Perhaps there may also be a role for retail central bank digital currency, but I remain to be convinced why the natural next step is to create a new form of money rather than put digital technology into retail payments and bank accounts.' His comments follow just days after he warned global banking giants against issuing their own stablecoins, which he said threaten to take money out of the banking system and therefore leave less available for lending. Mr Bailey has also appeared to be increasingly cooling on the idea of a digital pound in recent months, raising doubts over whether it would ever be officially launched. In his speech, Mr Bailey cautioned over the ongoing impact of the global trade war, with the current shift in policy marking the 'most sudden and fundamental in the post-war era'. 'The shifts we have witnessed – and continue to witness – mark a generational change in the system of trade amongst nations,' he said. 'Increasing tariffs creates the risk of fragmenting the world economy, and thereby reducing activity,' he said. 'Recent events have exposed fault lines in the multilateral system of relations between nations, including in the global trading system,' he added. He said the International Monetary Fund (IMF) and the Word Trade Organisation (WTO) can both work together and play a part in cooling the current trade war by helping 'achieve agreement amongst its members on the global rules of the road and how they are adhered to'. But he stressed he cannot 'underestimate the challenges' in addressing the current trade tensions.
Bloomberg
5 days ago
- Business
- Bloomberg
BOE's Bailey Urges ‘Global Cooperation and Engagement' at G-20
Bank of England Governor Andrew Bailey pressed the world's most powerful finance officials to embrace 'global cooperation and engagement' at a Group of 20 meeting that has been marred by the absence of US Treasury Secretary Scott Bessent. In his first dispatch to G-20 finance ministers and central bank governors as chair of the Financial Stability Board, Bailey noted the fraught backdrop. Economic and geopolitical tensions have increased, he said, while global debt vulnerabilities remain high and uncertainty continues to 'weigh on growth expectations.'
Free Malaysia Today
5 days ago
- Business
- Free Malaysia Today
UK labour market cooled rapidly in June
The Bank of England is expected to cut rates next month for the fifth time since last August. (AP pic) LONDON : Britain's labour market cooled sharply and the number of people available for work jumped at the fastest pace since the Covid-19 pandemic, according to data that is likely to back up the Bank of England's (BoE) plan to stay on its interest rate-cutting path. The Recruitment and Employment Confederation (REC) and accountants KPMG said today that their index of staff availability rose to 66.1 in June from 63.3 in May, the highest reading since November 2020. A reading above 50 represents growth. The survey is watched by BoE officials, who are increasingly relying on unofficial gauges of the labour market because of problems with some official data. The BoE is expected to cut rates next month for the fifth time since last August. Governor Andrew Bailey said in an interview with the Times published late yesterday that the BoE was sticking to its gradual and careful approach to cutting rates as it juggled the drop in employment with still-high inflation. 'If we saw the slack opening up much more quickly, that would lead us to a different conclusion,' he said. Only the pandemic, the global financial crisis of 2008-09 and the immediate aftermath of the Sept 11 attacks in the US have resulted in faster growth in job market slack in the REC and KPMG report. They said the latest readings reflected unusually high levels of uncertainty rather than a sudden downturn in Britain's economy. 'Ongoing geopolitical turbulence and the threat of rising costs, alongside the promise of technology efficiencies, mean companies continue to wait and see with their hiring,' said Jon Holt, group chief executive at KPMG. Starting pay for new recruits and demand for staff cooled, adding to signs that the labour market is losing momentum. Figures due out from the Office for National Statistics on Thursday are expected to show a similar slowdown in pay growth. British economic growth contracted unexpectedly in May, according to official data published last week. 'While US President Donald Trump remains unpredictable on his approach to trade tariffs, last month's publication of the British government's industrial strategy might increase certainty among companies' hiring plans,' Holt said.
BBC News
6 days ago
- Business
- BBC News
Bank of England prepared to cut rates if job market slows, says governor
The Bank of England is prepared to make larger interest rate cuts if the job market shows signs of slowing down, its governor has an interview with the Times, Andrew Bailey said "I really do believe the path is downward" on interest rates currently stand at 4.25% and will be reviewed at the Bank's next meeting on 7 August. They affect mortgage, credit card and savings rates for millions of people. In the Times interview, Bailey said there were consistent signs that businesses are "adjusting employment and hours" and are giving smaller pay rises following UK Chancellor Rachel Reeve's move to increase employers' national insurance contributions from raised national insurance rates for employers from 13.8% to 15% in April this year, in a move the government estimated would generate £25bn a said the UK's economy was growing behind its potential, opening up "slack" that would help to bring down inflation."I think the path [for interest rates] is down. I really do believe the path is downward," the governor said."But we continue to use the words 'gradual and careful' because... some people say to me 'why are you cutting when inflation's above target?"'Interest rates were held at 4.25% during the Bank's last meeting in June, following two cuts earlier in the that meeting, Bailey also said interest rates would take a "gradual downward path".The UK economy contracted by 0.1% in May, after also shrinking in April, according to the Office for National Statistics. The unexpected dip was mainly driven by a drop in manufacturing, while retail sales were also "very weak", said the Office. The UK's performance adds pressure on the government, which has made boosting economic growth a key priority.
