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US tariffs unlikely to have 'dramatic' UK impact, BoE chief economist says
Published by Global Banking & Finance Review®
Posted on May 9, 2025
2 min readLast updated: January 23, 2026
Global Banking & Finance Review®
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Published by Global Banking & Finance Review®
Posted on May 9, 2025
2 min readLast updated: January 23, 2026
US tariffs unlikely to dramatically impact UK economy, says BoE economist Huw Pill. Focus remains on domestic inflation and wage growth.
By David Milliken
LONDON (Reuters) -U.S. tariffs are not likely to have a "dramatic" effect on Britain's economy and the Bank of England should not neglect longer-term domestic pressures that might push up on inflation, BoE Chief Economist Huw Pill said on Friday.
Pill, who voted against Thursday's quarter-point BoE rate cut, said he understood the BoE's "gradual and careful" approach to future rate cuts as requiring it to be agile and alert to changes in the economy that might require a different approach.
"The analysis in the baseline forecast does not suggest that there's a dramatic shift in the behaviour of the UK economy on the back of these trade announcements and trade uncertainties," Pill said in a presentation to businesses.
On Thursday, the BoE said the impact of tariffs "should not be overstated" and was likely to lead to a 0.3% hit to the size of Britain's economy over three years and reduce inflation by 0.2 percentage points in two years' time.
That was based on U.S. tariffs in effect on April 29, before a deal was announced on Thursday which should see a reduction in high tariffs on U.S. imports of British cars and steel, though a lower 10% tariff on most other goods will stay.
Governor Andrew Bailey said earlier on Friday that this deal was "good news", relatively speaking, but still left tariffs higher than they had been previously.
Pill said the central bank would not allow the uncertainty over tariffs to distract it from returning inflation - set to rise to 3.5% later this year - back to its 2% target.
"There are other forces - and maybe more long-lasting and underlying forces in the UK economy itself. Fergal (Shortall, BoE director of monetary analysis) emphasised the dynamics in pay and wages, and I think correctly so (which) certainly we should not neglect," he said.
British wages are growing at an annual rate of around 6%, roughly double what most BoE policymakers think is a sustainable pace. On Thursday the BoE forecast private-sector wage growth would slow to 3.75% by the end of the year.
(Reporting by David Milliken; editing by William James and Andy Bruce)
The Bank of England suggests that US tariffs will likely lead to a 0.3% reduction in the size of Britain's economy over three years, with a minimal inflation decrease of 0.2 percentage points.
The Bank of England emphasized that it would not allow tariff uncertainties to distract from its goal of returning inflation, projected to rise to 3.5%, back to its 2% target.
British wages are growing at an annual rate of around 6%, which is roughly double what most Bank of England policymakers consider a sustainable pace.
A recent deal announced will see a reduction in high tariffs on US imports of British cars and steel, although tariffs remain higher than they were previously.
The Bank of England is taking a gradual and careful approach to future rate cuts, ensuring it remains agile and responsive to changes in the economic landscape.
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