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Headlines

Trump tariffs likely to push down UK inflation, BoE's Greene says

Published by Global Banking and Finance Review

Posted on April 25, 2025

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WASHINGTON (Reuters) -Bank of England policymaker Megan Greene said U.S. President Donald Trump's tariffs would probably lead to lower rather than higher inflation in Britain but big uncertainties remained about the plan and the impact of a recent UK tax hike for employers.

"We have tariffs, and none of us have any idea what they'll look like when the dust finally settles," Greene said in a discussion with the Atlantic Council think tank on the sidelines of the International Monetary Fund's spring meeting.

"In my mind, the risk space has changed a little bit. So I think the risk is now on the disinflationary side. So I think that tariffs on the UK would, on net, be more disinflationary than they are inflationary," she added.

Asked about what she was looking at ahead of the BoE's interest rates meeting next month, Greene said she was concerned about Britain's weak productivity growth and supply-side constraints on the economy.

"There's also a big uncertainty around the implications of the budget on the economy, and particularly higher labour costs," she said.

Labour costs for British firms rose this month when finance minister Rachel Reeves' increase in social security contributions came into effect. The minimum wage also went up by almost 7%.

Earlier this week, BoE Governor Andrew Bailey said the central bank had to take the risk to growth from the global trade tensions "very seriously", given Britain's reliance on foreign trade and investment.

Financial markets assigned a 96% probability to the BoE cutting rates by a quarter-point to 4.25% when it announces its next move on May 8.

Greene also said weaker growth in Britain's economy should help to bring inflation back to the BoE's 2% target. The labour market was weakening only slowly but wage growth should come down, she added.

(Reporting by William Schomberg, editing by Suban Abdulla)