The Bank of England must step in to stop market meltdown
08 April 2025 6:00am BST
The last few years have been a roller-coaster for central bankers and their reputations.
After 15 years of post financial crisis status quo, the pandemic forced them out of their slumber and into action. The Bank of England was widely praised for its decisiveness in slashing borrowing costs as Covid crushed household spending.
But Threadneedle Street was just as deservedly lambasted for its pedestrian response to the inflationary shock that followed the end of lockdown and Russia’s invasion of Ukraine.
The meltdown on global markets is a chance for the Bank and its overseas counterparts to redeem themselves by stepping in to constrain investor panic.
An extraordinary $9.5 trillion (£7.4 trillion) has now been wiped off stocks in the three days of trading since Donald Trump declared economic war on the rest of the world.
With Sir Keir Starmer and the rest of the Cabinet seemingly clueless as to what to do it may fall to Andrew Bailey to intervene with an emergency rate cut that acts as a circuit-breaker.
Economists at Deutsche Bank have described the disruption as “the biggest shock to the global trading system since the Bretton Woods collapse in 1971”, when Richard Nixon took America off the gold standard.
The White House can pretend all it likes that this amounts to a genius plan to rewire world trade in its favour, but this is starting to look like little more than wanton destruction – a wrecking ball to the world economy almost for the sake of it, from a man who revels in the extraordinary power he wields.
Worse, with the US president shrugging off the tariff turmoil as “medicine”, it is hard to see how or when the devastation will end. Having held on to – naively in my view – the hope that Washington was presiding over a short-lived shock and awe moment that would be quickly followed by a softening of tariffs, that has completely evaporated.
Instead, with Trump seemingly doubling down in the form of reciprocal tariffs later this week, traders are now preparing for what billionaire Maga supporter and hedge fund whizz Bill Ackman has warned is tantamount to “economic nuclear war”.
It is against this apocalyptic backdrop that investors are once again desperately looking to central bankers around the world to step in and save the world from oblivion.
The betting is now very firmly that a global trade war will be the trigger for a wave of interest rate cuts around the world – and not just one, either – including from the Bank of England.