\n<\/p>\n
\u201cT<\/span>he security blanket is covering us, but maybe we have a foot out in the cold.\u201d That was the typically colourful warning from the International Monetary Fund\u2019s managing director, Kristalina Georgieva, this week to its gathering of finance ministers in Washington.<\/p>\n At its spring meetings in April, the IMF said the erratic trade policies emanating from the White House, half a mile away from its glass and steel HQ, amounted to a \u201cmajor negative shock\u201d for the global economy.<\/p>\n Since then, experts\u2019 worst fears have not materialised \u2013 global growth has held up; frantic negotiations, agile manufacturers and new trading links have prevented supply chains collapsing.<\/p>\n But the US economy has been cushioned against the full effects of the trade shift by the AI mega-boom \u2013 and the IMF issued a clear warning this week that it may not last.<\/p>\n In its Global Financial Stability Report, published on Tuesday, the IMF said markets appeared \u201ccomplacent\u201d, given the policy tumult of the past few months. It highlighted three reasons to be anxious: overstretched valuations for tech stocks; volatility in government bond markets as they absorb fast-growing debts; and risks in the burgeoning private credit sector.<\/p>\n Georgieva said it was this last worry, in particular, that exercised her. Since bank regulation was tightened in the wake of the catastrophic global financial crisis of 2008, other less heavily scrutinised non-bank financial institutions (NBFIs), such as investment firms, have piled into the lending business.<\/p>\n The IMF frets that this huge \u201cshadow bank\u201d sector could unleash global chaos if loans start to go bad \u2013 particularly since many of the firms involved are funded via borrowing from mainstream banks.<\/p>\n \u201cAdverse developments at these institutions \u2013 such as downgrades or falling collateral values \u2013 could significantly affect banks\u2019 capital ratios,\u201d it said. In total, it found banks in the US and Europe have $4.5trn of exposure to NBFIs.<\/p>\n <\/span>JP Morgan\u2019s Jamie Dimon said \u2018when you see one cockroach, there\u2019s probably more\u2019.<\/span> Photograph: Shannon Stapleton\/Reuters<\/p>\n The recent collapse of the US car parts supplier First Brands and the sub-prime auto lender Tricolor, which had relied heavily on complex private credit financing, were regarded by some market veterans \u2013 including JP Morgan\u2019s Jamie Dimon \u2013 as a sign that more problems may be in store. \u201cI probably shouldn\u2019t say this but when you see one cockroach, there\u2019s probably more,\u201d he told an analyst call this week.<\/p>\n Within days, market fears had turned to a pair of shaky regional banks \u2013 Western Alliance and Zions Bank \u2013 and the sell-off continued into Friday.<\/p>\n The Trump administration, not a fan of financial regulation, appears relaxed about the issue, and more concerned with hammering China for its perceived unfair industrial and trade policies.<\/p>\n Washington is expected to use its chair status among the G20 group of countries next year to press for more international action to curb \u201cimbalances\u201d such as Beijing\u2019s persistent trade surpluses \u2013 with the IMF playing a role in policing member countries\u2019 policies.<\/p>\n In DC this week, though, it was the risks of more \u201ccockroaches\u201d emerging from the vast and globally connected US financial system that were exercising policymakers: especially veterans of the global financial crisis in 2008.<\/p>\n Asked about the issue of private credit at her press conference on Thursday, Georgieva said: \u201cWe are asking the question, what should be done to have more oversight and a better view of what is happening there?\u201d She added that the question \u201ckeeps me awake every so often at night\u201d.<\/p>\n For Rachel Reeves, the whirl of meetings in the US capital was a welcome reminder that the UK is far from alone in facing pressures on tax and spend, skittish bond markets \u2013 and tariff chaos. The British chancellor\u2019s energetic Canadian counterpart, Fran\u00e7ois-Philippe Champagne, with whom she has struck up a friendship, also has a tough budget to land next month, as Mark Carney\u2019s administration comes to terms with a new, harsher relationship with its neighbour to the south.<\/p>\n skip past newsletter promotion<\/p>\n Sign up to Business Today<\/span><\/p>\n Get set for the working day \u2013 we’ll point you to all the business news and analysis you need every morning<\/p>\n Privacy Notice: <\/strong>Newsletters may contain information about charities, online ads, and content funded by outside parties. If you do not have an account, we will create a guest account for you on theguardian.com to send you this newsletter. You can complete full registration at any time. For more information about how we use your data see our Privacy Policy. We use Google reCaptcha to protect our website and the Google Privacy Policy and Terms of Service apply.<\/span><\/p>\n after newsletter promotion<\/p>\n And such is the political instability in France \u2013 driven by financial pressures \u2013 that Reeves would have met her fifth French opposite number since Labour came to power last year, had Roland Lescure not stayed home to face the no-confidence votes in his prime minister.<\/p>\n <\/span>Rachel Reeves used the trip to start preparing the ground for tax increases at next month\u2019s budget.<\/span> Photograph: Jos\u00e9 Luis Maga\u00f1a\/AP<\/p>\n Reeves used the trip to start rolling the pitch for tax increases at next month\u2019s budget \u2013 including on the wealthy \u2013 and was rewarded with sliding yields on UK government bonds, known as gilts. The yield, which moves in the opposite direction to prices, determines the interest rate the Treasury pays to borrow from investors.<\/p>\n Analysts said the gilt moves were also part of a \u201cflight to safety\u201d as markets fret about the credit sector, but Treasury strategists were gratified nevertheless.<\/p>\n Meanwhile, as if to underscore the IMF\u2019s concerns about a \u201csudden, sharp correction\u201d in markets, its global financial stability review was launched at a press conference on Tuesday morning to a background of plunging stock prices. The fall was driven by Donald Trump upping the ante with China, posting a warning on his Truth Social platform that the US could cut off \u2013 of all things \u2013 cooking oil imports in retaliation for Beijing not buying its soya beans. Wall Street later rallied to close up on the day.<\/p>\n Across town that same day the Bank of England governor, Andrew Bailey, was telling an audience of investors at the Institute for International Finance conference that \u201cwe have to watch very carefully just how stretched valuations are becoming\u201d. With typical understatement, he added: \u201cThere are very different potential paths at the moment.\u201d<\/p>\n As the IMF was careful to point out, any reversal in the AI boom would have real-world impacts, as tech companies backed away from the investment that is powering the construction of vast datacentres across the US and beyond \u2013 and driving a wave of tech imports from Asia. \u201cThe decline in aggregate investment could be rather sharp,\u201d it warned.<\/p>\n And a crisis, if it came, would hit a politically fragmented global economy, in which many governments\u2019 finances are already stretched \u2013 with debt on course to hit its highest level since the aftermath of the second world war.<\/p>\n The temperatures in DC were unseasonably chilly this week, but the IMF did its best to warn policymakers, preoccupied with domestic struggles, of the mounting risk the global backdrop could cool sharply in the months to come.<\/p>\n","protected":false},"excerpt":{"rendered":" \u201cThe security blanket is covering us, but maybe we have a foot out in the cold.\u201d That was the typically colourful warning from the International Monetary Fund\u2019s managing director, Kristalina Georgieva, this week to its gathering of finance ministers in Washington. At its spring meetings in April, the IMF said the erratic trade policies emanating<\/p>\n","protected":false},"author":1,"featured_media":28889,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49],"tags":[4045,9645,1271,4175,1051,17116,17117,6654,531,807,16030,7059],"class_list":{"0":"post-28888","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-blow","9":"tag-cold","10":"tag-economic","11":"tag-foot","12":"tag-fund","13":"tag-huddle","14":"tag-icy","15":"tag-imf","16":"tag-international","17":"tag-leaders","18":"tag-monetary","19":"tag-winds"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/28888","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=28888"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/28888\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/28889"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=28888"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=28888"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=28888"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}