(18 February 2025 – United Kingdom) A loss of global trade cohesion will anchor global economic growth while the implications for inflation are more complex to reconcile, Bank of England (BoE) Governor Andrew Bailey warned.
The BoE slashed its forecast for British growth in 2025 to a mere 0.7 percent, highlighting potential tariffs on UK goods exported to the US in addition to a more general rise in uncertainty brought about by President Trump’s more aggressive trade policy. Trump asserted that he would impose high tariffs on steel and aluminium imports, including from the UK.
British government borrowing costs surged and then eased in January as investors tried to price global inflation risks in the light of Trump’s plan for tariffs on trade partners. The BoE wants to see less volatility in medium and longer-dated bond yields that have been driven up by speculation about the trade policies of President Trump.
“I do have to say that fragmentation of the world economy is negative for growth. The situation for inflation in a country that faces tariffs is actually fairly ambiguous in terms of what happens, because it depends upon trade redirection, it depends upon whatever measures are taken in response and it depends upon the reaction of exchange rates. You can’t easily predict it in advance” Bailey stated.