Bank of England’s Greene: US Tariffs May Push Down UK Inflation

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Bank of England policymaker Megan Greene has said that tariffs imposed by U.S. President Donald Trump are more likely to push inflation lower in Britain, rather than drive it higher, though she cautioned that significant uncertainties remain about the overall impact of both the tariffs and recent UK tax changes for employers.

“We have tariffs, and none of us have any idea what they’ll look like when the dust finally settles,” Greene remarked during a discussion with the Atlantic Council on the sidelines of the International Monetary Fund’s spring meeting. “In my mind, the risk space has changed a little bit. So I think the risk is now on the disinflationary side.

So I think that tariffs on the UK would, on net, be more disinflationary than they are inflationary,” she added.

Greene explained that because the UK has chosen not to impose reciprocal tariffs, it could become a destination for cheaper goods from Asia and the European Union, further contributing to downward pressure on prices. 

However, she also pointed to ongoing concerns about domestic inflation pressures, particularly weak productivity growth and supply-side constraints in the British economy.

“There’s also a big uncertainty around the implications of the budget on the economy, and particularly higher labour costs,” she said, referencing the recent increase in employer social security contributions and a nearly 7% rise in the minimum wage.

Earlier in the week, Bank of England Governor Andrew Bailey noted that the central bank must take the risks posed by global trade tensions “very seriously,” especially given the UK’s reliance on foreign trade and investment. Financial markets are currently pricing in a strong likelihood of a rate cut at the BoE’s next meeting on May 8.

Greene also commented that slower economic growth in Britain should help bring inflation back toward the Bank’s 2% target. “The labour market was weakening only slowly but wage growth should come down,” she said.