The International Monetary Fund was created to deal with global financial crisis.
Several in modern times have involved Britain, including Labour’s loan application to the IMF in 1976, bouncing out of the exchange rate mechanism in 1992, Brexit and its aftermath in 2016 and the Liz Truss conniption in October 2022.
So, at least when Rachel Reeves is here in Washington this week, she will be able to breathe a sigh of relief that Britain will not be at the centre of the universe.
The Chancellor might even have the chance to snatch triumph from disappointment if she can pull the outlines of an Anglo-American trade deal out of the fire.
Focus at this spring’s gathering of finance ministers and central bankers from around the world will be on President Trump’s America.
The handsome IMF headquarters may sit just blocks from the White House but the US rarely pays attention to what it has to say.
Donald Trump’s erratic tariff policy has skewered equity prices, pushed the 30-year-bond yield up to an alarming 4.88% and hammered the dollar, which is down nearly 9%
Indeed, despite its role as one of the key creators of the IMF at Bretton Woods, New Hampshire in 1944, it is not clear that the US Treasury Secretary Scott Bessent, who is due for a one-on-one session with Reeves, has any time for the IMF at all.
As a macro-hedge fund billionaire, the markets are the guiding light for this former George Soros protege.
The Wall Street picture is not good. Trump’s erratic tariff policy has skewered equity prices, pushed the 30-year-bond yield up to an alarming 4.88 per cent and hammered the dollar, which is down nearly 9 per cent.
The dollar has been the anchor of the post-gold financial system. The US has been able to accumulate debts of $27 trillion over the decades because of the willingness of other central banks and big battalion investors to hold dollars in their reserves. That could change rapidly.
Foreigners own some $8.5 trillion of that debt and more than half is held by private investors. If influential fund managers were to decide that Trumpian polices have become too toxic, a dollar-bond catastrophe could be triggered.
It would make it more difficult for Washington to refinance the $9 trillion of new debt over the next 12 months.
Meltdowns on the financial markets require a trigger. Wall Street’s great fear is the president’s attack on the independence of the Federal Reserve. Trump’s threat of ‘termination’ for chairman Jay Powell is unsettling.
Technically, Trump’s power is limited by the 90-year-old Humphrey’s Executor ruling of the Supreme Court. It protects independent federal officials from the wrath of the White House.
Signs are that Powell will not give in to Trump’s bullying. The chairman of Trump’s Council of Economic Advisors Kevin Hassett has qualms about the attack on the Fed and wants to restrain the president. But no one can be sure.
The indication from Austan Goolsbee, president of the Chicago Fed, is that Powell and the central bank will be guided by data only – inflation and unemployment. It will not be dragooned into cutting the federal funds rate by tariff turmoil.
The IMF could possibly help with that. Today it is expected to severely trim international growth prospects in the face of the trade war. The central bank has a mandate to defend the US economy against downturn and lost jobs.
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