Megan Greene, one of the Bank of England’s most hawkish policymakers, said Donald Trump’s wave of global tariffs is more likely to weigh on prices in the UK than it is to stoke higher inflation.
In an interview with Bloomberg TV on Tuesday, Greene said she has been on the cautious side of the BOE’s rate-setting panel due to lingering concerns over supply-side restraints, high wage growth and persistent inflation in the services sector.
However, she added: “I think that the tariffs actually represent more of a disinflationary risk than an inflationary risk, though. And so we’ll have to see how that develops going forward.”
Greene, an external member of the Monetary Policy Committee, said there was likely to be a lot more volatility to come as a result of White House trade policy. While the tariffs are expected to raise prices in the US, Britain could see the opposite effect due to the diversion of cheap Asian exports, a weaker dollar and the softening of demand from slower growth.
Asked about Trump’s verbal attacks on Federal Reserve chair Jerome Powell, meanwhile, Greene said “central bank independence is absolutely crucial”.
“Credibility is the currency of central banks and I think independence is quite an important piece of that,” she added. Greene was speaking at the start of a week in which many of the BOE’s most senior figures are making public appearances. Governor Andrew Bailey and deputy governor Sarah Breeden are due at panel events in Washington on Wednesday, alongside the IMF and World Bank’s spring meetings, with chief economist Huw Pill speaking in the UK earlier in the day.
On Tuesday, the IMF slashed the UK’s growth outlook by more than any leading European nation, largely due to the shocks from Trump’s policies. The MPC has stuck to a gradual once-a-quarter rate cutting cycle since last summer, yet the fallout from US tariffs has ramped up expectations of quicker easing.
Investors see at least three more cuts by the end of the year with a greater than 50/50 chance of a fourth. On Tuesday, Bank of America economists predicted four rate cuts by the BOE this year, up from their previous forecast for three reductions, and said they could not rule out rates falling as low as 3.25% next year.
The BOE will announce its next decision on May 8.
The pound remained steady against the dollar at $1.337, nearing a three-year high, while UK 10-year yields were little changed at around 4.55%. Money markets continue to wager on a quarter-point reduction at next month’s meeting with a total of 92 basis points more cuts expected by year-end.
Photo: Megan Greene on April 22. Photographer: Betty Laura Zapata/Bloomberg
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