Trump’s Trade Policies Cast Shadow Over UK Interest Rate Outlook, Says Bank Governor

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The Bank of England’s governor, Andrew Bailey, has expressed significant uncertainty regarding the future trajectory of UK interest rates, directly attributing this to the erratic trade policies of Donald Trump. Speaking to the Treasury select committee, Bailey indicated that while the overall direction for rates is still downward, the pace and extent of these cuts are now “shrouded in a lot more uncertainty.”
Bailey elaborated on the negative impact of a “fragmenting world trading system” on global growth and economic activity, noting that this uncertainty is already causing businesses in the UK to delay investment decisions. He highlighted that despite a UK-US trade agreement, tariffs remain elevated compared to pre-Trump levels, and as an open economy, the UK is particularly vulnerable to these wider global shifts.
Despite these concerns, Bailey reiterated his expectation for a decline in UK wage growth in the coming months, which could provide the Monetary Policy Committee (MPC) with more confidence to implement further rate cuts. He projected wage settlements to settle around 3.7% to 3.8% by year-end, a crucial factor for future policy decisions.

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