19 October 2026: Bailey walks out of IMF summit in protest against Russia

Andrew Bailey has joined finance leaders in walking out of an International Monetary Fund meeting to protest Russian involvement.

Bailey joined counterparts from France, Germany, and several Scandinavian and Baltic countries who left the session in Bangkok when Russian finance minister Anton Siluanov addressed the group in Russian.

The Bank of England confirmed Bailey’s participation.

The President of the Bundesbank, Joachim Nagel, said nearly half of the delegates joined the joint departure when Siluanov began speaking.

“The Ukraine war is existential for us in Europe,” one European diplomat told Reuters.

“We cannot normalise relations with Russia.”

The walkout was acknowledged by the chair of the IMF’s steering committee, Saudi finance minister Mohammed al-Jadaan.

Al-Jadaan said: “We came here for a reason, and we achieved it. Look at this chair statement; it clearly says that all members agreed to the statement, so that’s what matters.”

Germany had warned against efforts to bring Russia back onto the international stage. Siluanov attended a meeting of G20 Finance Ministers and Central Bankers earlier this year.

The US has supported Russia, however, with Treasury Under Secretary Erin Browne telling Reuters that Washington backed its presence despite European concerns.

The meeting in the Thai capital heard that the global economy was showing remarkable resilience despite Russia’s war against Ukraine and the issues around the Strait of Hormuz caused by the US and Israel’s bombing campaign.

Bank of England Deputy Governor for Financial Stability Sarah Breeden says hedge funds' growing presence in core government bond markets is making cross-market contagion more likely. Speaking on the sidelines of the meeting in Bangkok, she said the investor base has shifted from traditional long-term holders such as insurers and pension funds to hedge funds, which are more price-sensitive, leveraged, and internationally based.

Breeden says this shift increases the likelihood that a shock in one market quickly transmits to another. She added that stress is likely to come from bond markets and that spillovers are more likely than before.

The IMF says hedge funds now manage about $13 trillion in gross assets, underscoring their growing role in global markets. In its latest Global Financial Stability Report, published last week, the fund says hedge funds support market liquidity and efficiency. Still, it warns that leverage and crowded trades can intensify stress during periods of turmoil and spill into wider financial markets, including banks' prime brokerage activities.

Hedge funds use the same models to ‘design’ trades and frequently use AI to take positions across multiple markets at once. As a result, models using the same data can make similar or identical decisions, which can skew the market in a single direction.

The BoE will closely watch this week’s data releases, which may confirm the Bank's interest rate decision at its November 5th meeting.

Tomorrow, the August jobless figures will be published, followed on Wednesday by consumer and producer price data. CPI inflation is expected to rise to 3.4%, while the unemployment rate is likely to tick up from 4.9% to 5%.

Last week, the pound was among the world's strongest major currencies, rising against both the USD and the EUR. Sterling’s strength came from better-than-expected UK economic data, improving fiscal sentiment, and short-covering flows, while the euro struggled with French fiscal concerns and the dollar softened as Fed rate-hike expectations eased.

Reducing sanctions on Russia is hurting Trump’s popularity overall, especially among independents and in Congress, because the move has sparked bipartisan backlash, angered Ukraine, and raised concerns that he is rewarding Putin amid an ongoing war.

Trump’s waiver of Russia sanctions drew strong criticism from both Republicans and Democrats: Republican senators called the move “beyond irresponsible” and “unconscionable,” arguing that he is capitulating to Putin. Meanwhile, Democrats described it as a “surrender to Putin” that undermines Ukraine and defies Congress. Even Trump-aligned Republicans expressed disagreement, signalling cracks in his coalition.

This bipartisan condemnation typically depresses approval among moderates and independents, the voters most sensitive to foreign-policy controversies.

Secretary of State Marco Rubio defended President Donald Trump’s waiver on Saturday, outlining a 60-day review of its potential impact on the global and US economies.

Rubio said rising energy prices and the Middle East conflict made it necessary for the administration to assess the consequences and choose the most appropriate mix of measures.

Trump’s waiver does not specify an automatic expiry after 60 days. The Executive Order leaves the measures on hold until the President or designated officials decide that further action is appropriate.

Trump’s decision to waive the measures only days before they were due to take effect has drawn strong criticism from Congress.

Republican Senator Rick Scott said Russia was the aggressor and argued that the United States should do everything possible to increase economic pressure on Moscow. His Republican colleague, Senator Thom Tillis, called the waiver “beyond irresponsible” on social media and accused the administration of capitulating to a Russian dictator.

Industrial production rose 0.7% MoM in September, more than expected, after increases of 0.1% in August (0.0% initially) and 0.2% in July (unrevised), data from the Federal Reserve Board showed, indicating industrial activity remained on an upward trend. A 0.4% MoM increase in September had been expected in surveys. The latest reading marked the sixth straight MoM rise and the seventh in eight months.

The year-on-year growth rate accelerated to 2.2% in September, the highest since January, from 1.4% in August (1.6% in September 2025). The September IP index at 104.0 was 4.7% above a low of 99.3 in November 2024 and 4.8% above a low of 99.2 in January 2024. Quarterly, IP rose 0.7% q/q in Q3 ’26 (1.7% YoY), the sixth quarterly rise in seven quarters, after a 1.2% gain in Q2 ’26 (1.5% YoY), with the annualised growth rate moderating to 2.8% in Q3 from 4.8% in Q2.

Chicago Fed president Austan Goolsbee says AI infrastructure spending has shifted from a data- centre story to an inflation story, just as a hot September CPI print narrows the Fed's room to look away.

Last week, Goolsbee told a podcast that price pressure from the AI buildout is "jumping out of its lane." He said he didn't mean chips or GPUs. He meant electricians with one- year waiting lists, land prices near data centre sites, and electrical components being bid up by competition unrelated to software. "Prices are going up in spaces that are not just components in data centres and the directly adjacent industries," he said. That sentence should worry anyone holding AI stocks who assumes rate cuts are coming soon.

Goolsbee's specific fear is overheating, not a one- off supply shock. "I' m getting increasingly nervous that that' s just straight, old- fashioned overheating demand," he said on the podcast. He laid out why that distinction matters more than it sounds: supply shocks tend to fade on their own within a relatively short period. Demand-driven overheating doesn't. If AI investment is pushing GDP growth past potential and spilling into general services, Goolsbee argued, the Fed can't just wait it out.

The timing makes this more than an opinion. The Bureau of Labour Statistics' September CPI report, released on October 14, came in hotter than markets wanted: headline inflation at 3. 3.7% year over year, up from August's 3. 4%, and core CPI, which strips out food and energy, at 2. 2.6% against a forecast of 2. 2.5%.

Gasoline did a lot of the heavy lifting, up 9. 9.1% on the month. But the core number is closely watched by the Fed, and it moved the wrong way. According to media coverage of the report, the surprise put an October rate hike back on the table after markets had largely written one off.

Goolsbee didn't dodge the policy implication. "If inflation remains persistent, then I think it' s clear what the Fed has to do," he said. That's about as direct as a sitting Fed president gets in public, and it lands two days before a CPI print that gave him exactly the ammunition he was describing.

Last week, the USD strengthened modestly overall, supported by firmer US inflation data and rising Treasury yields, though performance varied sharply by region: gains against European and commodity currencies were offset by weakness against safe-havens, and performance was mixed in Asia.

US CPI and PPI prints came in slightly hotter than expected, pushing 2-year Treasury yields towards 5% and reinforcing expectations that the Fed would keep rates higher for longer, even if it doesn’t hike this month. This broadly supported the dollar, especially against currencies sensitive to rate differentials.

European Central Bank President Christine Lagarde has warned that a sharp sell-off in government bonds is tightening financial conditions across the Eurozone, threatening to slow economic growth as European governments already struggle with mounting debt and higher energy prices.

Speaking at the International Monetary Fund’s annual meetings on Saturday, 17 October, Lagarde said rising bond yields were putting additional pressure on the European economy, potentially reducing demand and helping to bring inflation down.

Her comments came as investors demanded higher returns on government debt across major developed economies, reflecting concerns about persistent inflation, widening budget deficits and the substantial borrowing requirements associated with investment in artificial intelligence.

The development complicates the ECB's position, which has already raised its key interest rate twice this year in response to renewed inflationary pressure following the conflict in the Middle East.

Higher government bond yields effectively tighten monetary conditions even without the Central Bank further increasing official interest rates.

However, discussing the rise in inflation on the periphery of the IMF meeting in Bangkok, Nagel told reporters that it may be that another rate hike will be delivered by the end of the year.

A couple of weeks ago, Bundesbank President Joachim Nagel told reporters that while Eurozone inflation remains elevated and upside risks dominate, there is currently no evidence of second-round effects from surging energy prices spilling into wages and broader prices.

However, he listed low gas storage levels, loss of refining capacity, drought, and fertiliser shortages as risk factors, warning that inflationary pressures will persist. He declined to endorse the additional rate hikes markets have priced in, emphasising the need for flexible, data-dependent decision-making.

Nagel held a joint press conference with German Finance Minister Lars Klingbeil in Bangkok on Friday. This comes less than two weeks before the European Central Bank’s 29 October policy decision, when he shifted to a more hawkish outlook. He told reporters he cannot rule out further rate increases if the situation stays the same or worsens.

Nationwide protests over the high cost of living roiled France on Saturday, adding to turmoil over public spending and debt ahead of a critical vote in the National Assembly.

Rioting broke out in some cities as luxury boutiques and supermarkets were looted, while public buildings were defaced and even set on fire.

That followed mass demonstrations earlier this month, with students decrying run-down classrooms, missing teachers, and buildings that aren’t equipped for rising temperatures. Protestors blamed years of underinvestment in public education.

At the same time, France’s looming debt has sent bond yields to the highest levels in 24 years, flashing warning signs not seen since the Eurozone debt crisis in 2011.

With far-right and far-left candidates leading the race for France’s next president in the spring, markets are losing confidence that either side will take the painful steps needed to rein in the deficit.

France is suffering from a crisis of liberal democracy, a crisis of fiscal mismanagement, and a crisis of youth disaffection.

The fiscal crisis is the most dangerous, underlying many of the country’s woes and threatening to bring it to ruin. France is truly on the brink.

The crises are also interconnected. For instance, while France’s education spending tops the European Union average, more than a quarter of the money pays for retired teachers' pensions. Pensions and the retirement age are the main ‘bones of contention’ behind the latest unrest.

The Euro ended the week stronger against the USD, supported by a late‑week pullback in US yields and softer Fed expectations, even though Eurozone fundamentals remained weak. This was despite hawkish comments from Fed officials, which were partly offset by the Bundesbank President’s remarks.

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