Bank of England Gov. Andrew Bailey told CNBC on Thursday that the UK is heading towards more economic uncertainty despite being the country that first won a trade deal with the US under President Donald Trump’s controversial tariff regime.
“The tariff and trade situation is injecting more uncertainty into the situation… there is more uncertainty right now than in the past,” Bailey told CNBC in an interview.
“In that sense, the UK-US trade agreement is very welcome. It’s very welcome. But the UK is a very open economy,” he continued.
This means that the impact of tariffs on the UK economy comes from not only trade relations with Washington, but also from relations between the US and the world, he said.
“I hope that what we see on the UK and US trade side is the first of many people and is repeated by a series of trade agreements, but of course we have to see where it actually happens.”
“Of course, we probably see higher tariff levels than they used to.”
According to CNBC Tally, the term “uncertainty” was used 41 times on 97 pages, starting with 36 in February, in the Bank of England monetary policy report released Thursday.
The UK Central Bank cut interest rates by a quarter point on Thursday, bringing its key fees to 4.25%. The decision was highly divided among seven members of the Monetary Policy Committee, with five votes with 25 basis points reductions, two votes to hold two votes, and two votes reduced by 50 basis points.
Bailey said that while some analysts perceived the rate decision as more hawkish than expected, he was not surprised by the close vote, although in other words, he leaned towards a rising holding rather than a quick cut.
“What it reflects is that there are two sides and there are risks here on both sides,” he told CNBC.
“We were able to get a much more severe weakness in demand than we had expected. It allowed us to move towards a weaker inflation outlook than we had expected.”
“On the other side, there’s the risk that we can get more sustainable combinations of gradual inflationary effects, such as wages and energy, but “the economy has a weak supply capacity,” he said.
