In the City The Risk US Tariffs Pose to the UK Economy
Apr 24, 2025
Tom Rees, a UK economy reporter at Bloomberg, dives deep into the implications of U.S. tariffs on the U.K. economy. He highlights insights from Megan Greene of the Bank of England, suggesting that these tariffs may actually create disinflationary risks in the U.K. rather than driving up prices. They discuss trade diversion, the potential for aggressive rate cuts, and the complexities of navigating U.K. monetary policy amidst global economic uncertainties. Rees emphasizes the need for the Bank of England to adapt to ever-changing market conditions.
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US Tariffs Could Drive UK Disinflation
- US tariffs likely create disinflationary pressure in the UK through trade diversion and currency effects.
- Falling oil prices and weaker global growth add to these disinflationary forces.
Inflation with Weak Growth Risks
- Weaker growth coupled with inflation poses a major policy dilemma for the Bank of England.
- Market expectations now favor significant rate cuts amid uncertainty.
Sterling Strength Adds Disinflation
- Sterling's recent appreciation acts as a disinflationary force in the UK.
- Bank of England closely watches exchange rate dynamics for policy decisions.