The “chaos” in Donald Trump’s trade policy is raising a red flag for the future of UK interest rates, according to Bank of England Governor Andrew Bailey. He told MPs that while a downward path for rates is expected, the “how far and how quickly is now shrouded in a lot more uncertainty.”
Bailey expressed dismay that the established system of trade agreements leading to lower tariffs has been “blown up” to a considerable degree, carrying “very serious consequences for the global economy.” This disruption is causing UK businesses to delay investment.
However, the governor still anticipates a decline in UK wage growth in the coming months, which could provide the Monetary Policy Committee with more confidence to cut rates. He projected wage settlements to be around 3.7% to 3.8% by the end of the year.