23 January 2026: I will pick a Brexiteer to run the Bank of England – Farage

Reform UK leader Nigel Farage said he was willing to reconsider every aspect of Britain’s economic policy if his party wins the next election, shrugging off the risk of a market backlash.

Speaking with the confidence, something he has never been short of, of a man who genuinely believes that he will be the country’s next Prime Minister, Farage told Bloomberg TV, “Given what a catastrophe UK economic policy has been over the last 15 years, I think we should challenge every single tenet of economic policy.” Although Reform only has seven MPs in Parliament, it’s been leading Prime Minister Keir Starmer’s governing Labour Party in the polls since last April.

Farage touted the freewheeling approach at the annual summit in Davos, which this year was dominated by Donald Trump, whose own disputes with the financial sector have been on full display in the Swiss mountains. Saying his past career as a commodities trader taught him to always defy the consensus view, Farage took aim at a slew of fundamental UK institutions.

Asked about the Office of Budget Responsibility, which oversees UK fiscal policy, he asked: “When did they last get a forecast right?” Farage called Bank of England Governor Andrew Bailey “a perfectly polite, nice man” but said “they should have picked a Brexiteer.” Of London’s financial services sector, he said: “I don’t like the banks very much.”

Someone who is desperately trying to create a love affair with the City is Rachel Reeves, who has been dealt a ‘harsh reality check’ after a surprise jump in inflation raised fresh questions over the health of the economy.

The Chancellor used her appearance at the World Economic Forum in Davos to insist ‘this is the year that Britain turns a corner’, official figures showed inflation hit 3.4 percent in December.

That is the highest of any G7 nation, up from 3.2 percent the previous month, denting hopes the Bank of England could cut interest rates before the Spring.

The report from the Office for National Statistics underlined the bleak situation facing the Chancellor after separate figures a day earlier showed almost 1,400 jobs were cut every day in the month after the Budget.

The 43,000 job losses in December, the most since the depths of the Covid-19 pandemic, followed 33,000 in November and took the total since Labour came to power to over 200,000.

The gloomy reports on inflation and jobs from the ONS came after forecasts from the International Monetary Fund suggested Labour is failing in its pledge to make Britain the fastest-growing economy in the G7.

Both she and the Prime Minister will have been relieved that Trump appears to have abandoned the threat of additional tariffs on the UK and its European neighbours as he tempered his threats over the takeover of Greenland.

The pound rallied strongly yesterday, reaching a high of 1.3503 as traders embraced an increase in risk appetite. It eventually closed at 1.3497 and looks likely to challenge its three-month high at 1.3530.

The J.P. Morgan CEO has generally been supportive of Donald Trump since his second term as U.S. President began a year ago. However, he has spoken out strongly against Trump’s suggestion that the interest rates on credit cards should be capped, calling it a potential disaster.

Jamie Dimon said the plan would remove credit from the majority of Americans and hit restaurants, retailers, travel firms and schools.

This month, Trump wrote on Truth Social that interest rates on credit cards should be limited to 10% for one year from 20th January.

The cap has yet to come into force, and the President did not say how it might be introduced or whether such a move would be legally enforceable.

Asked about the cap at the World Economic Forum in Davos, Dimon said: "It would be an economic disaster, and I'm not making that up because it's our business, we would survive it either way."

He said capping interest rates on credit cards at Trump's suggested level of 10% would be "drastic" and cut access to credit for 80% of Americans, adding that it is "their backup credit".

In a dig at senators Bernie Sanders and Elizabeth Warren, who have supported such a cap, he said if Trump did go ahead with the plan, it should be trialled in their respective states of Vermont and Massachusetts.

Meanwhile, Trump’s “wingman” Treasury Secretary Scott Bessent, also speaking in Davos, commented in response to threats of whole selling of U.S. treasury bonds that Denmark and its investment in the United States were “small potatoes.”

“Denmark’s investment in US Treasury bonds, like Denmark itself, is irrelevant,” Bessent told reporters when asked how concerned he is about institutional investors in Europe potentially pulling out of Treasuries.

“It is less than $100 million. They’ve been selling Treasuries. They have for years,” Bessent continued, adding, “I’m not concerned at all.”

Bessent has become a “lite” version of Trump and has barely had an original thought since he took over from Janet Yellen at the Treasury.

He was referring to AkademikerPension, the Danish pension operator, which said this week it was dumping its $100 million worth of US Treasury holdings because of “poor government finances.”

The $100 million represents a very small portion of the $30.8 trillion US Treasury market, but Denmark itself holds just under $10 billion in US bonds. As Bessent noted, the investment has been in decline for several years; the country held just under $18 billion in US Treasuries as recently as 2021.

The European Union collectively owns $8 trillion of America’s Treasuries, making it the largest financer of US debt.

The non-farm payrolls data will be published in the next couple of weeks, and it will be interesting to note if the numbers still carry the significance for the markets they had before last year’s Federal shutdown.

Trump's almost daily shock treatment has seen risk appetite act like a “cork on stormy seas” as he first almost declares war on Europe and follows that with an almost “kitten-like” offer of negotiations.

The dollar index fell to test its recent low as Trump’s appearance in Davos poured a little oil on troubled waters. It fell to a low of 98.28 and closed at that level.

European Central Bank President Christine Lagarde said Klaas Knot would be a suitable successor, Dutch newswire ANP reported, citing a podcast episode scheduled for release on Sunday.

“I’ve known him for at least six years. He has the intellect, the stamina, and the ability to engage others,” Lagarde was cited as saying.

Lagarde’s non-renewable term as ECB chief ends in October 2027.

The task of an ECB president often involves aligning the members of the Governing Council, which comprises the heads of the Eurozone’s national Central Banks, Lagarde was cited as saying.

“They’re often all prima donnas, and you have to facilitate them all,” she said. “He has that ability. But he’s not the only one.”

Knot was head of the Dutch Central Bank for 14 years through June 2025.

The ECB kept interest rates on hold at its December meeting as it had done for most of the second half of 2025, and didn’t give any hint at what could be next.

The just-released minutes of the meeting confirm this stance. In fact, the ECB discussed what every economic research department is currently grappling with: upside and downside risks, with a base-case scenario that looks relatively benign.

In the past, former ECB president Mario Draghi always said that when in a dark room, you only move very cautiously and slowly. Despite lingering uncertainty, the ECB sees itself not in darkness but in a ‘good place.’ And when you’re in a good place, there’s no reason to leave.

Some ECB members brought back the 'Goldilocks' label. "The macroeconomic narrative of a recovery driven by domestic demand remained intact, while trade was expected to recover over the projection horizon." It was suggested that, overall, this looked almost like a "Goldilocks forecast."

However, during the discussion, not everyone seemed to agree with the Goldilocks idea, as there were clear threats to the growth outlook, and it would be misguided to use the 'Goldilocks' label.

Any doubters were likely driven by Isabel Schnabel, who would predict rain on a gloriously sunny day.

There is a degree of coinfusion abot the word “ resilient” compared to the word strong. The Eurozone economy has proven itself to be resilient over the past six to nine months, but growth has been anything but strong, as some ECB members appear to feel.

It would not take much of a storm to blow the economy off course.

The German economy ended last year with momentum building, but first-quarter growth is likely to be modest, with inflation stabilising at 2%, the Bundesbank said in its first monthly economic report of 2026.

Germany's economy, Europe's biggest, became stuck in stagnation in recent years as industry suffered a big recession and US tariffs ate deep into exports, putting recovery bets squarely on the government's spending spree.

"The somewhat more pessimistic expectations of companies recently suggest that economic output is likely to grow only moderately in the first quarter of this year," the Bundesbank said.

"However, the easing of fiscal policy should provide a stronger boost later in the year," it added.

The Euro benefitted form a rise in risk appetite yesterday, climbing to a high of 1.1752 and closing at 1.1748.

Have a great day!