BoE Andrew Bailey warned today that the global economy is entering a more fragile phase, as the transition toward a multipolar world strains institutions built for a more stable and cooperative era. Drawing on economic history, Bailey said shifts in global power “invariably strain the operation of the system,” raising risks for growth and financial stability.
He pointed to a combination of structural headwinds weighing on the outlook, including a prolonged slowdown in productivity, ageing populations, rising defense spending, and climate-related economic shocks. Together, Bailey said, these forces form “a powerful force to complicate the operation of the international system,” making policy coordination and long-term growth harder to sustain.
Bailey argued that global tensions have increasingly shifted away from monetary relations toward trade, which he described as more vulnerable to domestic political pressures. Trade disputes, he said, are more easily blamed for changes in wages and living standards than exchange-rate movements. While warning against closing economies to trade, Bailey stressed that preserving financial stability will be essential as the global economy adjusts to changing power balances.
