Bank of England Governor Andrew Bailey said on Tuesday that the International Monetary Fund should take a leading role in addressing global economic imbalances, particularly those linked to the United States and China.
In a speech prepared for the annual Mansion House dinner, Bailey said large U.S. trade and current account deficits, combined with China’s surpluses and weak domestic demand, require multilateral action. He said national-level efforts alone would lead to weaker policymaking.
Bailey noted concerns from the U.S. administration over the IMF’s role, but said the Fund should still use its powers to convene discussions with member states, including the U.S., and work with the World Trade Organization to assess global trade dynamics.
He said financial markets usually put more pressure on countries with large deficits and pointed to recent market disturbances as a reason to remain alert to financial stability risks.
Bailey urged China to strengthen domestic demand to help reduce global imbalances and avoid trade restrictions and volatility.
As the new head of the Financial Stability Board, Bailey said he plans to work with the IMF to develop resilience tests for the global financial system, including banks and hedge funds.
He also supported the use of digital payment technologies for retail transactions and bank accounts but said he is not convinced about the need for a retail central bank digital currency. He added that stablecoins are not a substitute for commercial bank money.
Bailey said the focus of all efforts should be on increasing growth in the global economy to support living standards.
