A downturn in UK interest rates is still expected, but Donald Trump’s “chaotic trade policy” has added significant unknowns to the speed and extent of those cuts, according to Bank of England Governor Andrew Bailey. He informed MPs that the future path is now “shrouded in a lot more uncertainty.”
Bailey elaborated on the negative impact of a “fragmenting world trading system” on global growth and activity, noting that this uncertainty is causing UK businesses to delay investment decisions. He expressed regret that a long-established system of lower tariffs has been “blown up.”
However, a crucial domestic factor that could provide clarity is the anticipated slowdown in UK wage growth. Bailey projected wage settlements to be around 3.7% to 3.8% by year-end, a development that could provide the Monetary Policy Committee with confidence for further rate cuts.