Bank of England Governor Andrew Bailey said the Donald Trump trade war has shifted the global economy from “uncertain to unpredictable” to “uncertain to unpredictable”, but added that the path to cut speed remains “gradual, cautious”.
The US-UK trade deal cuts tariffs in the automotive sector to 10%, while steel companies’ steel will take effect next Monday, but a series of tariffs between the United States and many countries around the world remain.
“Global economic factors are not good for activity, global growth and innovation,” Bailey said in providing evidence to the Palace Economic Affairs Committee this afternoon.
The head of the central bank added: “It will all be very unpredictable. Obviously, we are arriving towards the end of the 90 days,” the head of the central bank added. [US] President Trump set out to reach a deal.
“So far, we have reached an agreement, the agreement with the UK. Obviously not implemented. That’s it at the moment.
“So we don’t know where this is going to be, I’m afraid we don’t know at this stage.”
Bailey said uncertainties allowed forecasters to guide past events, but there was little precedent for current Trump policies.
According to the latest national statistics, the cost of living has remained stable at 3.4% in the 12 months ended last week.
In a 6-to-3 distribution last week, the nine-member monetary policy committee voted to put the interest rate on hold at 4.25%, while lieutenant governors Dave Ramsden, Swati Dhingra and Alan Taylor ruled 25 basis points.
Bailey noted that inflation has jumped from 2.5% to 3,4% in recent months, while the debate on interest rates is a “sustainable” second round of price gains in areas such as “water, energy and private schools.”
Since August 2024, the bank has quadrupled its base rate, bringing it from 5.25% to 4.25%.
Traders are still expecting lower rates in August and November 2025, which will drop to 3.75%, and maintain a slower quarterly pace.
But Bailey told the House of Lords: “Our message is still gradually, cautiously, on the exchange rate. But we don’t want to give the impression that there are pre-set ways because the level of unpredictability is so high.”
