Uncertainty surrounding trade barriers, fueled by Donald Trump’s policies, is causing UK businesses to pause investment, further complicating the future path of UK interest rates, says Bank of England Governor Andrew Bailey. He indicated to MPs that while a downward trend for rates is likely, the timing and extent are now less predictable.
Bailey lamented the disruption of a long-established system of trade agreements that led to lower tariffs, describing it as having been “blown up.” This, he argued, has serious consequences for the global economy and directly impacts the UK’s open economic environment.
Despite these external challenges, the governor remains confident that UK wage growth will slow in the coming months, which could create favorable conditions for the Monetary Policy Committee to reduce interest rates further. He specifically pointed to projections of wage settlements around 3.7%-3.8% by year-end.