Bank of England Governor Andrew Bailey warns of global economic impacts from potential US tariffs, even if the UK isn't a direct target. Bailey highlights the interconnectedness of the global economy and the potential for fragmentation if tariffs are imposed. He also addresses the ambiguity surrounding the impact on inflation, noting it depends on various factors, including the response of other countries.
Even if the U.K. is not the 'direct recipient' of potential tariffs imposed by the U.S., 'it will have an effect,' Bank of England Governor Andrew Bailey said Thursday. If tariffs are announced, their effect on the global economic growth and inflation would need to be looked at, Bailey told CNBC's Steve Sedgwick. 'Now I think that in terms of growth in the world economy, if this will lead to a, you know, fragmentation of the world economy, that is not good for growth,' Bailey said.
'The impact on inflation is more ambiguous, because it depends upon what other countries do in response, it depends on what the consequences of those actions and reactions are for trade,' he added. U.S. President Donald Trump has warned that the U.K. could be in line for tariffs, but has also indicated a willingness to negotiate. Bailey on Thursday also noted that the U.K. 'does not have a substantial trade imbalance with the U.S.' The U.S. was the U.K.'s biggest trading partner in the year to September 2024, accounting for over 17% of total U.K. trade, according to. What's important for Trump, though — who has expressed dissatisfaction when the U.S. exports less to a country than it imports — is the numbers are almost balanced. Bailey also pointed out that services are a large part of U.K. trade, which classic tariffs do not affect in the same way as other goods. The Bank of England on Thursday cut its benchmark interest rate by 25 basis points to 4.5%. Seven members out of the nine-strong monetary policy committee (MPC) voted in favor of the cut, while two members voted for a larger 50 basis-point reduction. After the announcement, Bailey said in a press conference that the MPC expected to be able to cut interest rates further as disinflation progressed, but noted that these decisions would be taken on a meeting-by-meeting basis. Speaking to CNBC, Bailey described the cut as 'careful' and 'gradual,' adding that the central bankers were using those words 'very deliberately.' The word 'gradual' referred to the disinflation process, while 'careful' was a nod toward 'risks and uncertainties,' he said. Such uncertainties, 'could lead to us having, frankly, you know, higher inflation, which we will have to deal with. We're going to have this sort of uptick in inflation.' He added that this inflation is unlikely to persist., according to data released in December, while the latest monthly GDP reading showed the economy expanded just 0.1% in November, after shrinking by 0.1% in October
Tariffs UK Economy Bank Of England Andrew Bailey Global Economy Inflation US Trade Policy
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