20 January 2026: Reeves is branded ‘desperate’ and ‘delusional’ as the IMF warns that the UK is lagging behind America

Bank of England Governor Andrew Bailey has called upon Governments to challenge the rise of populism across the globe.

Speaking to senior Central Bankers, Bailey said, “the rise of so-called populism” made the task of raising living standards harder.

He said populism came with a tendency to emphasise domestic production opposed to “international openness” and “attribute unfavourable conditions” to outside forces.

“For those of us who are institutionalised, the answer is that we have to challenge, in deeds more than just words. But, we have to ensure our houses are in order, too.”

Bailey also said challenges facing global growth included ageing populations, increased defence spending and climate-related economic shocks.

His comments came after Central Banks publicly backed the Federal Reserve after Donald Trump’s Justice Department launched an investigation into the Fed and its chair, Jerome Powell.

A statement from the Bank of England read: “We stand in full solidarity with the Federal Reserve System and its chair, Jerome Powell.

“The independence of Central Banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve.”

The Government’s insistence that the UK economy is "turning a corner" has been branded "desperate and delusional" after a new report showed the country lagging behind most of its G7 counterparts.

The International Monetary Fund's (IMF) growth predictions for the UK in 2026 and 2027 remained unchanged from previous forecasts in its latest outlook report, at 1.3% and 1.5% respectively.

While the figures put Britain on track for greater growth than countries such as Italy, France and Japan, it continues to trail the US and Canada in terms of GDP.

The UK and Italy were also the only G7 countries not given a growth upgrade for 2026.

Chancellor Rachel Reeves, as usual, focused on the report's confirmation that Britain's economy grew 0.1% more than expected last year, exceeding the IMF's prediction of 1.3% to reach 1.4%. She hailed the news as a testament to "the stability we have brought to the economy and the investment we've unlocked", leading economists to brand her optimism "delusional".

The co-founder and chief executive of Keychain, which works with major supermarkets to identify costs in the supply chain, told reporters that the imposition of new tariffs “wouldn’t stay confined to trade statistics, they would start showing up in the weekly shop”.

It came amid warnings that the export levy could wipe 0.1 percent off Britain’s GDP, increasing to as much as 0.3 percent if the tariffs are increased to 25 percent as Trump has threatened, a hit that could tip the UK’s ailing economy into recession.

The pound rallied strongly yesterday, climbing to a high of 1.3439 and closing at 1.3435. This is a big week for data, with the latest employment data due today, inflation numbers tomorrow, and government borrowing, consumer confidence, and retail sales later in the week.

If the U.S. Supreme Court strikes down President Trump’s tariff plans, the administration plans to begin replacing them almost immediately with other levies, U.S. Trade Representative Jamieson Greer said in an interview.

Greer, who is Trump’s top trade negotiator, said in an interview late last week with The New York Times that, following any adverse ruling, the administration would "start the next day” to reestablish tariffs "to respond to the problems the President has identified.”

Greer expressed optimism that the Supreme Court, which is currently reviewing the President’s use of an emergency law that underpins most of his tariffs, would rule in the administration’s favour. But said he and other advisers had given the President "plenty of different options” to achieve his trade goals at the beginning of the administration, meaning the president could turn to different legal authorities to impose similar tariffs worldwide.

"The reality is the President is going to have tariffs as part of his trade policy going forward,” Greer said.

The Supreme Court has been weighing the legality of the President’s use of the 1977 International Emergency Economic Powers Act to impose tariffs on trading partners worldwide over the past year. The court could rule in the coming weeks, potentially as soon as today, to revoke some or all of that authority.

Alternatively, the court could approve of the President’s approach. Over the past year, Trump has invoked numerous international emergencies to swiftly raise tariffs on trading partners for various reasons. The President has imposed tariffs to reduce trade deficits, stop the inflow of illegal drugs, and address other international situations.

Presidents live in election cycles, and another election is always just around the corner. Growth feels good, voters are happy, and nobody likes to be told the economy needs to slow down. An independent Central Bank acts as the "adult in the room," willing to raise interest rates to curb inflation, even if it makes the President or the public unhappy.

That is why the Fed was made independent.

The most important protection is instrument independence, which is the authority to set interest rates without taking orders from the White House. A President may complain, tweet or apply pressure, but legally, he cannot command.

Fed Governors serve 14-year terms, staggered so no president can dominate the board. A Fed chair cannot be fired for disagreeing with the President. He can be removed only for corruption or gross misconduct. Seen in that light, recent scrutiny of the Fed’s headquarters renovation takes on greater significance. To critics, it looks less like a budgeting dispute than a search for a legal lever, some way to remove a chair who refuses to bend.

Without its independence, interest rates would become a political tool if politicians were to almost always choose growth today over stability tomorrow. And ordinary life would become far more expensive, very quickly.

Federal Reserve Chair Jerome Powell will attend Supreme Court oral arguments tomorrow in a case addressing whether President Donald Trump can fire Fed Governor Lisa Cook.

The Supreme Court initially allowed Cook to remain in office in October as it prepared to hear arguments this month.

Powell's planned attendance comes as he wages a broader battle to preserve the Fed's independence from political pressure. Earlier this month, the Fed chair announced that the Justice Department served the Central Bank with grand jury subpoenas and threatened a criminal indictment.

The subpoenas, which focus on a $2.5 billion renovation of Fed buildings, came after Trump had repeatedly pressured the Central Bank to lower interest rates further. The president has lashed out at Powell in particular, calling him "too late" and a "major loser."

The Federal Reserve declined to comment on Powell's attendance at the arguments. Powell has said that the threatened indictment was related to his June testimony to the Senate about the renovations, but argued that "those are pretexts."

The Dollar index declined to a low of 99.00 and closed at 99.05 amid heightened risk aversion amid EU tensions.

Inflation in the euro area fell to 1.9% in December, according to new figures, down from 2.1% and below the expected 2%.

It marked the first time since May that inflation has come in below the European Central Bank’s (ECB) 2% target, reinforcing expectations that interest rates will remain on hold.

EU core inflation, meanwhile, fell to 2.3%, a slight decrease from the 2.4% registered in November, according to new official figures from Eurostat. It said that the lowest annual rates were registered in Cyprus (0.1%), France (0.7%) and Italy (1.2%). The highest annual rates were recorded in Romania (8.6%), Slovakia (4.1%) and Estonia (4%).

Compared with November 2025, annual inflation fell in eighteen member states, remained stable in three, and rose in six.

Services inflation remained sticky in December as the highest contributor to euro area inflation, up 1.54%. Prices for food, alcohol & tobacco (+0.49%) and non-energy industrial goods (+0.09%) were the highest increases.

Eurozone finance ministers on Monday nominated Croatia’s Boris Vujcic to succeed Spaniard Luis de Guindos as European Central Bank Vice-President.

Vujcic, 61, is head of the Croatian National Bank, a role he has held since 2012. He also steered Croatia’s membership of the single currency area in 2023.

De Guindos is due to end his term at the Frankfurt-based institution in May.

The EU’s 27 leaders need to green-light his nomination after consultations with the European Parliament and the ECB’s governing council.

An economist by training, Vujcic beat five other candidates from Estonia, Finland, Latvia, Lithuania and Portugal.

The Bundesbank stated in its monthly report yesterday that the country's economy will recover "gradually," starting in the second quarter of 2026.

"While progress will be subdued initially, it will then slowly pick up," Bundesbank President Joachim Nagel said, adding that with the second quarter, "economic growth will strengthen markedly, driven mainly by government spending and a resurgence in exports."

Moreover, inflation is expected to decline at a slower pace than previously projected in the coming months due to the "continued high level of wage growth." At the same time, the Central Bank forecasts that the real gross domestic product, adjusted annually, will grow by 0.6% in 2026 and by 1.3% in 2027.

The single currency rallied to a high of 1.1649 yesterday and closed at 1.1645, as the EU began to look at ways to counter the threat of renewed tariffs likely to be imposed by President Trump, as Brussels has no intention of acting on Trump’s demand to “take over” Greenland.

Have a great day!