The future path 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 told MPs. He explained that while the overall direction for rates is downwards, the pace and how far they will fall are now less clear.
Bailey expressed concern that the established pattern of global trade agreements, which led to lower tariffs, has been “blown up” to a significant extent, carrying serious consequences for the global economy. This disruption is causing businesses in the UK to delay investment, thereby impacting economic activity.
However, the governor still expects UK wage growth to slow in the coming months, which could provide the Monetary Policy Committee (MPC) with a clearer path for rate cuts. He specifically cited agents’ pay survey data suggesting wage settlements will be around 3.7% to 3.8% by year-end.
