IMF Special: Signals from Washington

Edited transcript

+ 00.49 Financial deregulation in the spotlight

What themes have stood out most in your discussions?

What's top of mind is the growing divergence in approach to financial regulation between the US and Europe. Global discussions regarding financial deregulation have been ongoing and the US has implemented changes at a faster pace than the UK and Europe, where progress has been slower.

At the same time, the banking landscape has become exceptionally competitive with increased competition from the non-banking financial space. 

These two factors could create a more challenging environment for European and UK banks going forward as they may be at a disadvantage relative to their US peers. 

+ 2.00 International investor sentiment on the IMF’s global growth forecast

The IMF has raised its global growth projection to 3.25% for 2025 from 3% in July, the second upgrade in successive forecast rounds. What's behind this change of view and how does it shape the mood among international investors?

It's certainly good to see global GDP forecasts revised upwards, albeit just a little. However, growth is uneven across the world. There are pockets of strong growth in some areas and slower growth elsewhere.

Having said that, there is growth momentum, which is positive, and having spent a few days with international investors here in Washington, the mood is generally optimistic.

+ 2.48 International investor sentiment on the UK

The IMF expects the UK will be the second fastest growing advanced economy in 2025. Yet, inflation remains stubbornly above the Bank of England's 2% target. So, is there more confidence among investors or is caution still the prevailing mood?

I would say that most investors would really love to see interest rates coming down sooner and by more than the forward curve is currently forecasting. We have seen interest rates reduce somewhat over the last year, but we need further rate cuts to stimulate more activity, which would benefit both corporate and private clients.

Inflation staying a little higher than everybody would like is holding central banks back from reducing rates, which is slowing down the recovery. We'd prefer to see rates come down sooner.

One of the most pressing themes at this year's meeting has been global debt. The UK government, like many advanced economies, is facing tough fiscal choices. But there are some indications of improving sentiment among UK consumers. From your interaction with international investors, do you think investor sentiment on the UK is improving? 

There has been increased interest in the UK, particularly as investors look to reduce their exposure to the US.

Although there is lots of discussion around some of the difficulties facing the UK economy, it remains a major, global financial centre. We are seeing lots of new and exciting businesses developing in many different sectors across the UK. And at the same time, international capital is flowing into many UK companies.

So, while the political environment is challenging, there is optimism and a focus on growth in the corporate sector.

+ 4.57 Global investors’ views and future strategies

What signals are you picking up about investment appetite in the UK and Europe? Are investors looking for opportunity in this uncertainty or simply just seeking safety? 

I would say that over the past few years or so, we've faced significant uncertainty. As a result, corporates and individuals have learned to navigate and adapt to this increasingly complex environment.

But businesses with healthy balance sheets and access to capital are optimistic about the future and pursuing opportunities, despite a more challenging macro environment.

Despite the turbulence of the past few years, the global economy has shown remarkable resilience. So, as we look to 2026, do you think the global economy is on a more stable footing?

I would describe the overall mood as optimistic. I believe that corporates, institutions and banks have become adept at navigating macro, political and geopolitical challenges. Balance sheets are in good shape. There is a lot of capital and liquidity on the sidelines, ready to invest. I think everyone is looking forward to taking advantage of opportunities and moving forward regardless of the challenges ahead.