UK interest rates more uncertain due to Trump policies, says Bank governor
The Bank of England governor, Andrew Bailey, has told MPs that the future path of interest rates in the UK has become more uncertain because of Donald Trump's chaotic trade policy.
Asked about the impact of on-off tariffs for the Bank's policymaking by the cross-party Treasury select committee, Bailey said 'the path remains downwards, but how far and how quickly is now shrouded in a lot more uncertainty, frankly'.
The Bank's nine-member monetary policy committee (MPC) has cut interest rates four times – to 4.25% – since last summer, as inflation has slowed.
Bailey warned that some businesses were now telling the Bank that they were pausing investment due to the uncertainty around trade barriers.
'The impact of fragmenting the world trading system is negative for world growth and world activity: it obviously increases uncertainty,' he told MPs. 'You hear it now when you go round the country from businesses. One impact of that is that it tends to cause delays and putting off of investment decisions.'
He welcomed the UK's trade agreement with the US, but said that tariffs remained higher than before Trump came to power, and that because the UK is such an open economy, it is more affected by the wider global picture.
'The overall picture on trade now I'm afraid is one where the rules-based system is sort of dead,' he said. 'That has very serious consequences for the global economy.'
Bailey also said he continues to expect wage growth to decline in the coming months – suggesting the MPC may feel more confident to cut rates.
'I have no evidence to doubt the steer from our agents' pay survey that come the end of this year … wage settlements should be around 3.7- 3.8%, which is a good percentage point below where we are now,' Bailey said. He added: 'That's going to be a crucial judgment going forward.'
The governor also acknowledged that financial markets have been volatile in recent weeks as a result of rapidly changing US trade policy. 'This is having a big impact on markets; markets have moved quite a lot since our last meeting,' he said.
He expressed particular concern about the market 'constellation' – where equity markets are falling, at the same time as US bond yields have risen and the dollar has depreciated – suggesting these periods have shifted White House policy.
'We had two periods in the post 'liberation day' period where that became quite acute, frankly. On both occasions, the administration did respond: the first led to the 90-day period to negotiate trade agreements, the second one concerned the position of chair Powell,' he said.
'We haven't seen that particular constellation since, because the equity markets haven't behaved in the same way. But I think we have to watch this very carefully, because the equity markets appear to be discounting a more optimistic view of how this will pan out.'
Sign up to Business Today
Get set for the working day – we'll point you to all the business news and analysis you need every morning
after newsletter promotion
Two external members of the MPC, Swati Dhingra and Catherine Mann, appeared alongside Bailey and explained their own voting decisions on interest rates.
Dhingra, a trade expert, who has repeatedly voted for lower rates than the MPC has set, said she was concerned that keeping rates high may be damaging the economy's future capacity to grow. She suggested this could prompt her to support half-point cuts at future meetings.
'If for a long time we've held policy too tight, at some point that level and that time period over which policy has been too tight, starts to play a role, which means I now need to start thinking about, do I increase the decrements for which I've been voting or not?' she said.
Mann, who voted for a half-point reduction in February, against the majority, but did not support the quarter-point cut the committee made last month, made clear she prefers more 'bold' moves.
'In order to make a clear statement about the stance of monetary policy appropriate for the UK, I think it's important to make a bolder move, and then to hold for longer,' she said.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
17 minutes ago
- Reuters
Swedish flash inflation below forecast, strengthens rate cut hopes
STOCKHOLM, June 5 (Reuters) - Swedish inflation came in below forecasts in May, flash figures showed on Thursday, raising hopes that the central bank will cut interest rates in the coming months as the economy slows. Swedish headline consumer prices rose 0.1% in May from the previous month and were up 2.3% from the same month a year earlier, the statistics office (SCB) said. Excluding volatile energy prices - a measure the Riksbank is looking closely at currently - inflation was 2.5% on the year and 0.2% on the month. The Riksbank targets 2% headline inflation. "Our forecast is that the Riksbank will stay on hold at 2.25% in June, but the surprisingly low inflation and sluggish GDP growth increases the probability for a rate cut," Nordea economist Torbjorn Isaksson said. The central bank will publish its next monetary policy decision on June 18. In May it held its key rate unchanged at 2.25%, but said lower growth this year could open the door to a cut, assuming that the outlook for inflation remains benign. The economy shrank in the first quarter as uncertainty around U.S. tariffs hit business investment and household spending. The government expects GPD growth of 1.8% this year. Analysts in a Reuters poll had forecast headline inflation of 2.5% on an annual basis and 0.3% compared to the previous month. Ex-energy inflation was seen at 2.6% and 0.3% respectively. Headline inflation was 2.3% in April compared to the same month a year earlier and 0.2% against March. Stripping out energy, inflation was 3.1% in April on the year and 0.5% on the month.
Telegraph
19 minutes ago
- Telegraph
I live in a UK beauty spot threatened by Labour's planning bill. It could become a disaster zone
The UK needs houses. The UK needs open spaces, and wilderness. The Labour government's Planning and Infrastructure Bill, which cleared its second reading in the House of Commons with a majority of 256 votes, is only interested in the former. At the end of 2024, Keir Starmer declared that homes must have a higher priority than nature and the environment, as ministers outlined reforms that could allow more building on England's green belt. Housing minister Angela Rayner backed him, asserting that 'we can't have a situation where a newt is more protected than people who desperately need housing'. The populist punditry that would once have been anathema to leaders and politicians in general is designed to detract from the dire consequences if the bill is passed. Lawyers, environmental charities – including the RSPB and Wildlife Trusts – and activists have assessed that more than 5,000 of England's most vulnerable protected natural habitats are at risk of being destroyed by development thanks to Labour's new planning bill, which has been dubbed a 'licence to kill'. These would include many of the UK's favourite holiday destinations, such as areas that fall under designations like Sites of Special Scientific Interest, the Ramsar Convention on Wetlands, Special Protection Areas, Special Areas of Conservation, and much-loved nature-rich parts of National Parks and National Landscapes (formerly AONBs), like the New Forest and the Forest of Bowland. As I live in the Forest of Bowland, I have a stake in this debate. I live in a ribbon of farmland that lies between the Forest of Bowland proper and Pendle Hill, which is part of the same protected National Landscape. South of here is East Lancashire, one of the most densely populated parts of the UK. For residents of Burnley, Blackburn and Accrington, Bowland is the second nearest large green space, after the West Pennine Moors. But Bowland is different. As the 'Forest' in its name suggests it is a former hunting chase, and while there are some pockets of grouse moor management that still rile most ordinary residents and visitors, swathes of the park are open country, ideal for hiking, cycling and family picnics. For decades, access was complicated here, with grouse butts and private lands blocking walkers. Just two decades ago, much of Bowland was opened up to walkers for the first time when the Countryside and Rights of Way Act 2000 gave general right of access to the public to 'access land' for the purposes of open-air recreation on foot. People can walk, run and – where permitted – ride bikes wherever there are paths. To be candid, Bowland doesn't have Instagram-friendly summits to bag or famous poets' houses to swoon over. It doesn't attract countless car-tourers or caravan-users. It is absolutely nothing like the Lake District or nearby Yorkshire Dales. Many of its upland areas are boggy and only the very well-acquainted would want to negotiate the steep-sided valleys or gully-riven, heather-clad slopes. But the relatively low visitor numbers are great for nature. A sizeable central section of the 300-square-mile National Landscape is designated as a Site of Special Scientific Interest because of the habitats it helps to protect and its internationally important bird populations. One of these is the merlin, the UK's smallest bird of prey (it's only about the size of a thrush). On my last visit I saw one at a distance, seated – ironically – on a grouse butt. During the same half-day visit I also spotted meadow pipits, curlews, skylarks, a stonechat, a greylag goose, and nesting peregrines. The most surprising sighting was a couple of ring ouzels – a red-listed species (that is, 'of high conservation concern') and members of the thrush family that dwells on the uplands. The absolute high point was the bird for which Bowland had become famous: the hen harrier. At first I saw males and females skimming across the top of the heather. This was satisfying enough; hen harriers are among the most persecuted birds in the country. Then I was treated to a sky dance, which is when a male hen harrier performs extraordinary aerial stunts to show off to females, to warn off rival males, or – perhaps – just for fun. The one I saw did Red Arrows-style vertical leaps, back flips, twists and turns, against a clear blue sky. It was one of those moments in nature, all of five minutes, that felt life-enhancing and deeply moving. Does any of this matter as much as the desperate housing situation? Is wildlife really as important as new estates? Is it not time rural England accepted that cities can't accommodate all the new houses and flats? Would Bowland not in fact benefit from development? Am I trying to promote tourism and leisure – arguably luxuries for only some members of society – and ignoring the needs of millions of people? The honest answers to all these questions is clear to anyone who lives in places like the Forest of Bowland. The UK is one of the most nature-depleted nations on earth. How often do we hear now the distressing news that butterflies are disappearing, that once familiar birds have become near-extinct, that hedgehogs are on the same path already taken by red squirrels? Even my greenish patch within the greater Bowland area is, frankly, a classic farm-ageddon of dry-stone wall-to-wall sheep fields, with very limited birdlife and a worrying lack of insect life. The flora that lies outside the sheep-mowed areas is not particularly diverse. The trees are, as often as not, plantations of conifers. This is precisely why we need to protect, at all costs, those areas where species thrive or, at least, have a chance to revive. Bowland is the last place to reimagine how England should reside in the coming decades. As well as being an important, if imperfect, space for nature – as outlined above – it has risible road connections, no railways passing through it, and only a couple of bus services that run infrequently and never after dark. The whole area is poorly supplied with the essential, basic amenities communities need to thrive, from schools and hospitals to theatres and cinemas to local shops and places to eat and drink. Dropping blocks of beige housing – this area seems to specialise in hideous and overpriced executive homes – would at best attract some retirees. Alternatively, if truly affordable housing were built in any useful quantities, the Government would have to seriously consider a new town project of some kind. The nearest urban areas – Preston, Blackburn, Lancaster – currently have deep-set housing, social and transport problems of their own. They all take forever to reach on the winding country lanes that link, eventually, to the jammed and dangerous A59 – the one major trunk road that tears through the Ribble Valley in a blaze of boy-racers, trundling tractors and pelotons of unhappy cyclists. Try this experiment in any of the 5,000-plus precious areas and the results will be the same. The tourism and leisure, exercise and inspiration that ordinary people get from being close to birdsong and surrounded by unsullied, unpeopled emptiness will be sacrificed to cover up the deep tragedy of 40 years (and counting) or poor planning by all shades of government, national and local. Much of British wildlife is threatened. Nightingales, badgers, dormice, otters, butterflies, dragonflies, kingfishers, tufted ducks and egrets are just some of the beautiful creatures that the extant, already damaged natural areas help to conserve. If we wipe these out, and destroy the places they inhabit, what is there for people to do, to see, to admire? The wealthy will go overseas, adding air miles. The rest of us will have nowhere to stretch our legs or lungs. Bowland is no paradise, no idyll. But Labour's short-sighted and unscientific scheme to fill the hills and vales with houses, in the face of criticism from experts from many camps, will turn it into a disaster zone.
Telegraph
20 minutes ago
- Telegraph
Manchester United launch £55m bid for Bryan Mbeumo
Manchester United have offered a package worth up to £55 million for Brentford forward Bryan Mbeumo. But United are expected to need to increase their offer to persuade Brentford to sell, with west London club thought to value the Cameroon forward over £60 million. United have bid an initial £45 million with a further £10 million in add-ons and Ruben Amorim is hoping to make Mbeumo his second signing of the summer after Matheus Cunha. The Brazil forward has been signed from Wolves for £62.5 million. Mbeumo, 25, has a year left on his contract at the Gtech Community Shield but Brentford's hand is strengthened in part by an option that allows them to extend his deal by a further 12 months. Nonetheless, Mbeumo is understood to be keen to move to Old Trafford after setting his sights on United despite strong interest from other clubs including Newcastle. The Cameroonian – who scored 20 goals and claimed seven assists in the league season just gone – will hope a compromise can be struck as talks over a deal continue. Brentford manager Thomas Frank has indicated the club are willing to sell Mbeumo but only at the right price and warned last month 'that's going to be expensive'. United's principal focus this summer is on addressing the team's chronic shortage of goals. There has been a concerted move to recruit players with Premier League experience but who still fit the right age profile. Their total of 44 goals from 38 Premier League goals en route to finishing in 15th position was the lowest in the competition bar the bottom three and Everton. Mbeumo's flexibility is known to appeal to Amorim. He has played as a right winger, striker, right sided No. 10 and right wing back in varying systems under Frank at Brentford, including the 3-4-2-1 favoured by Amorim. United had also wanted to sign Liam Delap from Ipswich Town but the striker opted instead to join Chelsea. In an ideal world, Amorim had potentially envisaged Mbeumo and Cunha as his right and left sided No 10s with Delap upfront and Bruno Fernandes - who has rebuffed an enormous offer from Saudi Pro League club Al Hilal - possibly dropping into a deeper midfield role. However, it remains to be seen if United get a deal over the line for Mbeumo and with Fernandes staying whether they are able to recruit a recognised centre-forward this summer or run with a flexible, interchangeable attack. Any successful move for Mbeumo on top of Cunha's arrival would swallow up United's summer budget and dictate that the club need to sell before they can buy again. United are hoping to offload four wingers - Alejandro Garnacho, Marcus Rashford, Jadon Sancho and Antony - to raise funds to reinvest as they commit whole-heartedly to Amorim's system. But they could also sell Denmark striker Rasmus Hojlund, who is attracting interest from Italy, and are open to offers for other players, not least the high-earning veteran Brazil midfielder Casemiro. Delap's age, cost – he had a £30 million release clause following Ipswich's relegation – size, pace and skillset appealed and fit with Amorim's style of play. But few traditional No 9s are available and fit United's price bracket this summer. Amorim also has Amad Diallo, Joshua Zirkzee and Mason Mount as attacking options and has admitted publicly the club will not be able to make all the changes needed in a single summer. The onus will be on selling - and selling well - but there are no guarantees they will be able to shift some players quickly. Chelsea paid a £5 million penalty to back out of an obligation to buy Sancho following his loan spell with the West London club. Barcelona are keeping tabs on Rashford. Real Betis are interested in turning Antony's loan into a permanent deal. Garnacho was the subject of bids from Napoli and Chelsea in January but it remains to be seen where the Argentine winger may go and for what price. His attack aside, Amorim would like reinforcements in midfield and at wing back and there has been a desire for increased competition for goalkeeper Andre Onana, who has been linked previously with a move to Saudi Arabia. Meanwhile, the man overseeing United's recruitment business this summer, Jason Wilcox, has been named as the club's director of football as part of the reshuffle that has seen Sir Dave Brailsford relinquish his day-to-day role with the club. Wilcox was brought in as technical director in April last year but his new title reflects his increased role and responsibilities in the wake of Dan Ashworth's shock exit last December. Brailsford will remain on the football club board but is reducing his commitment with United to return to focusing on his wider remit as Ineos Sport's director of sport.
