In a rare break from the drumbeat of bad economic news, a senior Bank of England policymaker has said Donald Trump’s tariffs are more likely to push inflation down than up.
This led to markets pricing a 100% chance that the BoE's monetary policy committee will cut interest rates at its meeting next month, as well as offering a measure of relief for Chancellor Rachel Reeves as she contends with growing pressure on UK industry.
Megan Greene, a member of the MPC, told Bloomberg TV on Tuesday that the UK’s decision not to retaliate with tariffs of its own means Britain could become a destination for cheaper goods from Asia and the EU.
“The tariffs actually represent more of a disinflationary risk than an inflationary risk,” she said.
Her comments follow an HSBC survey showing that a majority of UK manufacturers plan to scale back investment due to tariff uncertainty, raising fresh concerns about growth.
While Greene welcomed the likely price impact of the tariffs, she reiterated caution on domestic inflation, citing persistent capacity constraints. That, she said, explained her conservative stance on interest rate cuts so far.
The MPC's next policy decision is due on 8 May.
Markets are now fully pricing in a rate cut, amid fears that Trump’s trade policies could tip the global economy towards recession, up from an 82% chance earlier seen earlier today.