17 February 2026: The BoE is under pressure to ‘cut interest rates and go for growth’ amid weak economic figures

UK bank bosses will hold their first meeting to establish a national alternative to Visa and Mastercard, amid growing fears over Donald Trump’s ability to turn off US-owned payment systems.

The meeting, chaired by Barclays’ UK chief executive, Vim Maru, will take place this Thursday and bring together a group of City financiers who will front the costs of a new payments company to keep the UK economy running if problems arise.

The City-funded, but Government-backed, initiative has been under discussion for years. However, Trump’s recent threats against NATO allies over Greenland have amplified concerns that an overreliance on US companies could put UK payments and the wider economy at risk.

About 95% of UK card transactions are made using payment systems owned by Mastercard and Visa, according to a 2025 report by the UK’s Payment Systems Regulator. That dominance has become far more relevant as cash use across the country continues to decline.

If Mastercard and Visa were turned off, it would send us back to the 1960s, before cards dominated the UK economy and businesses relied wholly on cash. There is no question, we need a sovereign payments system.”

Potential disruption could be vast. In Russia, where businesses rely on Visa and Mastercard for 60% of payments, US sanctions that forced the companies to shut down their services left ordinary people stranded without access to funds and unable to buy goods.

Similar concerns are being raised in the EU, where politicians have taken a vocal stance on building locally owned networks that could not be turned off on a whim by foreign powers. The chair of the European Parliament’s economic and monetary affairs committee, Aurore Lalucq, issued a stark warning last month about relying on US companies for such an essential service that went viral.

The TUC is urging the Bank of England to cut borrowing costs more aggressively, arguing Britain’s economic recovery requires more decisive monetary policy action.

Union leaders argue that weak economic growth should take priority over inflation concerns that continue to influence committee members.

This raises an interesting dilemma for both the Chancellor and the Bank’s Governor. His mandate is to maintain financial stability, and the fact that Rachel Reeves “No.1 priority” is not working cannot be laid at the door of the Central Bank.

Official data showed the economy expanded by just 0.1 percent during the final three months of last year, below the 0.2 percent growth economists had forecast.

The umbrella union group said that elevated borrowing costs are restricting household spending power and slowing the pace of economic recovery.

Paul Nowak, TUC general secretary, said: "The Bank of England has a crucial role to play here. Last year, they were overly cautious and too slow to act. They should pursue growth with a series of quick-fire cuts this year.

"Lower interest rates would help households and help the high street, putting money in people's pockets to spend in shops and restaurants, and boosting confidence for consumers and for businesses."

TUC analysis shows UK consumer spending has grown more slowly over the past three years than in 32 of the 37 member states of the Organisation for Economic Co-operation and Development.

The financial market is currently driven by commercial orders, as large investors remain sidelined, waiting for the next monetary policy surprise or global event that shifts market expectations. Yesterday, Sterling traded in a narrow range between 1.3662 and 1.3625, closing at 1.3630.

President Donald Trump’s choice to lead the Fed may finally get the chance to affect Fed Policy, aided by a Treasury secretary with the same goal. And Wall Street is obsessed with finding out what comes next, ‌bracing for the possibility of extensive market disruptions.

Kevin Warsh has bemoaned the Fed’s purchase of trillions of dollars in U.S. government debt and bundled mortgages after both the 2008 financial crisis and the 2020 pandemic, a process that kept longer-term interest rates down to boost the economy and flooded banks with cash reserves.

But any effort to significantly reduce those holdings risks spiking interest rates and rattling the funding market that underpins the financial system. So, to pull off any reform, he knows he will have to proceed with great caution.

“The transition to what I think is a more prudent system will take time, deliberation and an excess of communication with the public and the institutions in the banking system itself,” Warsh said last year at an event hosted by Stanford University’s Hoover Institution, where he is a visiting fellow.

The dangers for Warsh run in multiple directions. Any turbulence that pushes up longer-term rates would clash with Trump’s goal of reducing government borrowing costs and lowering mortgage rates. And Warsh will have to convince his colleagues on the FOMC to back any changes he’s proposing, which is no guarantee.

Speculation about the path of future Fed policy is heating up as the President is eager to juice both the housing market and the broader economy in the run-up to the elections, with polls showing that voters are souring on his handling of household issues.

What’s more, the ultimate result of reforms by Warsh might cause market turmoil with little perceptible gain. That has some money market observers questioning whether reform is actually coming at all.

FOMC members will ask, “Are the costs going to be worth the benefits?”, and they may not see Warsh’s vision.

Meanwhile, Federal Reserve Governor Michelle Bowman is seeking to provide a significant boost to the mortgage market by exploring ways to reduce banks' regulatory costs associated with mortgage lending and servicing.

"These potential changes would address legitimate concerns about mortgage market structure while maintaining appropriate prudential safeguards."

Bowman said that the Central Bank will propose two mortgage-related rules in the near future.

This is an area attracting considerable attention, as the U.S. housing market is lagging and may be weighing on the broader economy.

Chicago Fed President Austan Goolsbee addressed the markets yesterday and had some notable comments. He sees both encouraging and concerning parts in the latest CPI data, although “we are still seeing pretty high services inflation.”

He hopes that the peak impact of tariffs has been reached, although services inflation is worrisome.

The most recent employment data shows that the job market has been steady, with only modest cooling.

“Rates can still go down, but we need to see further progress on inflation”. Consumer spending should hold up if the jobs market is stable and inflation eases, although he is not sure how restrictive Fed policy is.

“We are not yet on a path back to 2% inflation yet, and are stuck around 3%.”

The dollar index is consolidating at lower levels. Its current base seems to be around 96.80, with investors placing orders at that level, though they are not driving aggressive buying. Yesterday, the index rallied to a high of 97.12 and closed at 97.09.

Euro-denominated stablecoins can be a valuable tool for cheap international transfers, supplementing the European Central Bank’s push for a digital common currency, Governing Council member and Bundesbank President Joachim Nagel said yesterday.

Discussing transatlantic frictions, the Bundesbank President said Europe must become more independent of payment systems and highlighted the ECB’s work to create a digital euro.

The ECB is managing a similar project to the one which will be launched in London this week.

“I also see merit in euro-denominated stablecoins,” he told an event at the American Chamber of Commerce in Germany. “They can be used for cross-border payments by individuals and firms at low cost.”

President Donald Trump’s push to make crypto more mainstream has raised fears that dollar-backed stablecoins could gain a foothold in Europe, threatening the region’s banks and monetary sovereignty.

Nagel’s remarks suggest growing open-mindedness at the ECB on euro-pegged stablecoins, after some officials fretted about the dollar’s dominance and the fact that the instruments are privately issued and could jeopardise financial stability.

Nagel said last week that the Eurosystem could support Distributed Ledger Technology-based payment instruments not directly related to Central Bank money, in particular, tokenised deposits and euro-denominated stablecoins.”

He also warned that “a hypothetical replacement of a domestic currency with stablecoins would be equivalent to a dollarisation of the corresponding economy,” though he called the risk small.

Speculation is well underway about who will succeed Christine Lagarde as ECB president at the end of next year. Recent events in France have added a timing factor to the debate.

Francois Villeroy de Galhau’s surprise resignation last week as Banque de France President, for personal reasons, he insists, leaves the choice of his successor to outgoing French President Emmanuel Macron rather than to a possible far-right successor such as Marine Le Pen or her protege, Jordan Bardella.

Their National Rally party is riding high in the polls ahead of elections in fifteen months, causing alarm across the whole continent. So chatter is intensifying, what if the ECB, just like the Bank of France, could be made far-right-proof, too?

The opportunity exists for European governments, and it reaches beyond just Lagarde‘s job. That’s because Chief Economist Philip Lane is set to leave five months before her, in May next year, while Isabel Schnabel’s term on the six-strong Executive Board expires two months later, in December 2027.

It’s a coincidence that makes an all-at-once, package appointment of successors more likely.

Villero de Galhau told staff at the Central Bank that “his task was largely accomplished and that it was time “to pass on the responsibility.”

Jean-Philippe Tanguy, a top lawmaker in the far-right National Rally, said he suspected Villeroy’s early departure was a manoeuvre to lock in influence over the Central Bank and stop the next president from appointing the new governor.

Villeroy explained that he had been approached to take over the presidency of the Fondation Apprentis d’Auteuil, a Catholic charity that helps young people from difficult social backgrounds enter the job market. He said he had taken his decision “in complete personal independence” and added that there would be enough time between now and June to organise a smooth succession.

The Euro lost a little ground yesterday in a quiet day's trading. It fell to a low of 1.1846 and closed at 1.1853.

Have a great day!