Governor of the Bank of England Andrew Bailey will pause before the start of the Monetary Policy Report press conference at the Bank of England held in London, England on February 6, 2025.
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“It would have an effect,” Bank of England Governor Andrew Bailey said Thursday, even if the UK is not a “direct recipient” of the potential tariffs imposed by the US.
If tariffs are announced, it will need to consider global economic growth and impacts on inflation, Bailey told CNBC’s Steve Sedgwick.
“Now, from a global economic growth perspective, if this leads to fragmentation of the global economy, then it’s not good for growth,” Bailey said. “The impact on inflation is more ambiguous because it depends on what other countries do accordingly, and the outcome of those actions and reactions is on trade,” he said. added.
US President Donald Trump has warned that the UK could be lined up for tariffs, but has shown that the deal could potentially be hit. Last week, Trump announced tariffs on goods imported from China, Canada and Mexico, and subsequently suspended its import obligations from two economies.
Bailey on Thursday also said the UK “has no substantial trade imbalance with the US.”
Official data shows that the US was the largest trading partner of the year until September 2024, accounting for more than 17% of total UK trade.
Depending on which numbers you look at, both countries have a small trade deficit or surplus. But what’s important for Trump is that people who expressed their dissatisfaction when the US exports less to the country than imports are almost balanced in numbers.
Bailey also pointed out that services are a major part of UK trade and that classic tariffs do not affect them like other goods.
Deciding “stage-wise” and “careful” BOE
The Bank of England cut benchmark interest rates by 25 basis points on Thursday to 4.5%. Seven of the nine Monetary Policy Committees (MPCs) voted in favour of the cut, while two members voted for a larger 50 cut.
After the announcement, Bailey said at a press conference that while MPC expects it will be able to cut interest rates further as disinflation progresses, those decisions will be made on a meeting-by-meet basis.
Speaking to CNBC, Bailey described the cut as “careful” and “incremental,” adding that central bankers use those words “very intentional.”
The word “staged” refers to a “careful” process, and “careful” nodded towards “risk and uncertainty.”
Such uncertainty can lead to, “Frankly, you know, having a higher inflation than we have to deal with. We have this kind of inflation “We intend to increase this inflation is unlikely to last.
Also, Thursday’s BOE halved UK growth expectations over 2025. This has gone from 1.5% to 0.75%.
Data released in December shows that the economy was flatlined in the third quarter, but the latest monthly GDP reading saw the economy grow by just 0.1% in November after shrinking by 0.1% in October. It was shown.
– CNBC’s Chloe Taylor and Holly Eliatt contributed to this report.
