| It's been another bad year for Francis Fukuyama, the author of books including The End of History and the Last Man — which, if you'll excuse a sweeping synopsis, proposed in 1992 that the world was strolling toward a liberal democratic settlement capable of ending millennia of tribalism, wars and ideological strife.
In fact, never mind a bad year — even this week has been pretty bad for Fukuyama's theory, given the historic return of Donald Trump to the White House. The world is arguably more volatile and fractious than at any point during my lifetime. And I lived through the last eight years of the Cold War. Today, the Ongoing Existence of History is very much on the minds of the West's leading central bankers. After the pandemic I recall some economists predicting a golden era of economic growth and stability. Instead, we've had Russia's invasion of Ukraine, escalating conflict in the Middle East and now the prospect of renewed trade wars.
Whenever one thinks that interest rates might start to really tumble, a curveball comes flying through the air and sends even the most dovish of monetary policy voters into a flap.
Little surprise, then, that while the Bank of England followed expectations of a quarter-point cut at lunchtime, it left itself a vast amount of room for manoeuvre over the coming months.
"We are still in a world where there are very big global geopolitical shocks going on and there are very big uncertainties in the world economy and in the world at large," said Governor Andrew Bailey.  Andrew Bailey during the news conference earlier today Photographer: Hollie Adams/Bloomberg He was answering Bloomberg TV's Francine Lacqua, who asked what was more complicated for the BOE: Labour's inflationary budget, or the threat of tariffs. Bailey's answer was clear. The UK is so exposed to international shocks that our domestic policies often pale in comparison. The "fragmentation of the world economy is not a good thing," he added, during a separate interview with Lacqua in which he revealed that the BOE advised Labour on the potential for market turbulence stemming from the budget.
So while Rachel Reeves' tax hikes and spending spree will add as much as half a percentage point to UK inflation, there are more portentous reasons for the BOE to emphasize the words "gradual" and "gradually" when referring to the path of rate cuts. No longer is Bailey hinting at "aggressive" easing, as he did last month.
Tonight, Federal Reserve Chief Jerome Powell will make his own attempt to balance the current state of the economy with political threats going forward. Powell, needless to say, has more to worry about than Bailey. He needs to think not only of the consequences of Trumpism on the economy — but also on his own position, and the sanctity of the Fed's independence.
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