The UK’s highly open economy is feeling the pinch of global trade flux, particularly due to Donald Trump’s policies, making the future of interest rates more uncertain, according to Bank of England Governor Andrew Bailey. He conveyed this vulnerability to the Treasury select committee.
Bailey emphasized that the “fragmenting world trading system is negative for world growth and world activity,” and this uncertainty is causing UK businesses to delay investment decisions. He expressed regret that a long-established system of trade agreements leading to lower tariffs has been “blown up.”
Nonetheless, 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.