“Shrouded in Uncertainty”: UK Interest Rates Face Trump Trade Headwinds

The future of UK interest rates is now “shrouded in a lot more uncertainty” due to Donald Trump’s “chaotic trade policy,” Bank of England Governor Andrew Bailey has warned MPs. He stated that while the overall direction for rates is downwards, the pace and magnitude of cuts are less clear.
Bailey expressed concern that the global trading system, which fostered lower tariffs, has been “blown up” to a considerable degree, with serious implications for the global economy. This disruption is causing businesses in the UK to delay investment, impacting overall economic activity.
Nonetheless, Bailey continues to anticipate a decline in UK wage growth, projecting settlements to be around 3.7% to 3.8% by the end of the year. This domestic factor could provide the Monetary Policy Committee with the confidence needed to pursue further interest rate reductions.