Bank of England Governor Andrew Bailey has strongly stated that Donald Trump’s trade actions have “blown up” the long-established system of trade agreements that led to lower tariffs, creating “very serious consequences for the global economy” and increasing uncertainty for UK interest rates. He shared this view with MPs.
Bailey highlighted that this fragmentation is negatively impacting world growth and activity, and is already causing UK businesses to delay investment decisions. He emphasized the vulnerability of the UK’s open economy to these wider global developments.
Nevertheless, 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.