9th May 2025 14:42
(Alliance News) - Tariffs and trade uncertainty are not causing a "dramatic" shift in the UK economy, the Bank of England's chief economist has said, as he cautioned over "misleading" views on the impact of the new UK-US trade deal.
Huw Pill's remarks come a day after the BoE cut interest rates to 4.25% and lowered its outlook for UK economic growth next year.
He said: "I think it is important to say that the analysis in the baseline forecast does not suggest that there's a dramatic shift in the behaviour of the UK economy, on the back of these trade announcements and trade uncertainty."
Speaking at the national Monetary Policy Committee (MPC) agency briefing, Pill said the main view was that trade disruption will "weigh on growth" in the UK.
The impact on inflation was more "ambiguous", he said, but overall it was predicted to "weigh a little bit down" on the rate that prices are rising.
"But there are other forces that may be more long-lasting and underlying in the UK economy itself," Pill said, referring to trends like pay and wage growth.
"I think certainly we should not neglect [these trends], and they certainly need to be read carefully, in the assessments of the overall inflation process," Pill said.
Pill, who is a member of the Bank's MPC, was among the members to vote against cutting rates to 4.25%, instead preferring to leave them unchanged.
He said the Bank reinstating its "gradual and careful" approach to reducing rates on Thursday "should be understood to mean that we are alert to, and agile in the face of, the uncertainties that faces the UK economy now".
The rate decision on Thursday came ahead of Prime Minister Keir Starmer and US President Donald Trump unveiling a new UK-US trade agreement, which removes tariffs on UK metals exports to the US and reduces a levy on cars.
Pill stressed that the measures needs to be "carefully thought through" as there could be "misleading views" about its overall macroeconomic impact.
He said: "We do need to be cognisant of the fact that there are potential channels by which the UK benefits from having somewhat preferential trade arrangements through this new agreement with the US.
"But there are also channels by which, to the extent that that puts other jurisdictions at a disadvantage and we trade with those jurisdictions, that can have further knock-on effects."
By Anna Wise, PA Business Reporter
source: PA
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