BoE Governor Andrew Bailey warned that rising geopolitical tensions pose risks to financial stability and growth as the central bank cautiously continues gradual rate cuts with inflation still above target.
Bank of England Governor Andrew Bailey has stated that geopolitical tensions and the resultant uncertainty will be key considerations for the nation’s central bank, given the impact they can have on financial stability. He made the remarks during his testimony before the Parliament’s Treasury Committee regarding the central bank’s Financial Stability report on Tuesday.
Resilient Growth: Bailey suggested that the brewing geopolitical tensions could have a bearing for growth, the Guardian reported. That said, the central bank chief said, “Growth in the world economy was a lot more stable than we thought it would be.”
Despite the abounding uncertainties, the International Monetary Fund sees the global economy growing at a robust 3.3% clip in 2026. In its January report, the IMF said headwinds stemming from shifting trade policies will likely be offset by tailwinds from surging investment related to technology, including artificial intelligence (AI).
Market Worried About Greenland Crisis? The BoE governor also wondered about the market's muted reaction to the U.S. President Donald Trump’s decision to impose additional tariffs on eight European nations as he seeks to subjugate the independent territory of Greenland.
That said, he suggested these two cannot be taken as a point of assurance. “Overriding those points, I take neither of those as a point of assurance. We have to be very alert to these things,” he said.
The U.S. market, which is said to open after a long weekend due to the Martin Luther King Jr. Day public holiday, is poised to open Tuesday’s session sharply lower. The most actively traded E-Mini S&P 500 futures contract for March delivery was down over 1.50% early Tuesday, ahead of the market open.
Where Is BoE Policy Headed? The central bank cut rates by a quarter point in December to 3.75% by a 5-4 split vote as inflation fell faster than expected, although remaining above the BoE’s 2% target, and as economic slack rises. Following the rate decision, JPMorgan economists said, “The Bank Rate is expected to continue its gradual downward path, though decisions on further policy easing will become more finely balanced.”