Could Trump’s Fed Attacks Trigger a Global Crash? Bank of England Sees Risk

The Bank of England sees a credible risk that Donald Trump’s attacks on the US Federal Reserve could help trigger a global financial crash, especially when combined with a fragile bubble in the artificial intelligence market. The bank’s Financial Policy Committee (FPC) warned of a “sharp repricing of US dollar assets” if the Fed loses credibility.
In its latest stability report, the FPC highlighted “continued commentary about Federal Reserve independence” as a major threat. It cautioned that a “sudden or significant change in perceptions” of the Fed could lead to turmoil in US sovereign debt markets, with “the potential for increased volatility” and “global spillovers.”
This political risk is emerging at a time when equity markets are already seen as “stretched,” particularly for AI-focused tech companies. The FPC noted the soaring valuations of firms like OpenAI and Anthropic as a sign of speculative excess. It warned that these markets are “particularly exposed” to a downturn if the hype around AI cools.
The cooling may be inevitable, according to recent data. An MIT study found that 95% of businesses are currently seeing no financial return from their generative AI investments. This stark reality could lead to a “sudden correction” as investors are forced to re-evaluate the high future earnings they have priced into these stocks.
The FPC stressed that the UK is not safe from these intertwined threats. As a major financial hub, Britain would be hit hard by a US-led crisis. The report concluded that the risk of spillover is “material,” and a global crash could severely restrict access to finance for British households and businesses.