Donald Trump’s trade policy is having “serious impacts for the global economy,” fundamentally reshaping the pattern of trade deals and lower tariffs, a development that introduces significant uncertainty for UK interest rates, according to Bank of England Governor Andrew Bailey. He told MPs that the system has been “blown up.”
This global economic fragmentation is leading to tangible consequences for UK businesses, with some pausing investment due to the unpredictable nature of trade barriers. Bailey stressed the negative impact on world growth and activity.
However, a potential mitigating factor for the Bank’s Monetary Policy Committee is the anticipated decline in UK wage growth. Bailey expects wage settlements to fall in the coming months, which could provide the confidence needed for further interest rate reductions.