LONDON (Reuters) – The Bank of England cut its main interest rate by 0.25 percentage points to 4.25% on Thursday, despite an unexpected three-way split among policymakers as U.S. President Donald Trump’s tariffs weigh on global economic growth.
Here’s what Bank of England officials said in a press conference following that decision:
ANDREW BAILEY, BANK OF ENGLAND GOVERNOR
On reports of UK-U.S. trade agreement:
“I very much welcome it, and I think it’s very well done to those involved, and the reason for saying that is that it will help to reduce uncertainty.”
“We haven’t been briefed, so I’m speaking without knowing the content of the agreement.”
On his vote on interest rates:
“I was very undecided, frankly, as to where we were going to be this time, at that point in time. And then, you know, I’ve taken all the news into consideration. And all the news, by the way, critically, includes how the UK situation has moved on… Having gone over the evidence, also having gone around the country and talked to quite a few firms, I’m more confident about that. And then the trade news gets layered onto that…. I was in the fairly undecided camp actually. I wasn’t particularly decided one way or the other.”
On global trade:
“We expect global trade prices to be materially weaker, particularly in China. The U.S. administration has made a series of announcements with significant changes to tariff policies. Some of its trade partners have responded.
“Volatility in financial markets has accompanied these announcements. Slower growth in the global economy is likely to reduce the demand for our exports and impact economic activity here in the UK.
“That reduction in external demand will also work to reduce inflationary pressures in the economy. But while the impact of what we have seen so far is likely to push inflation down somewhat, the overall impact on inflation remains uncertain.”
“I think it’s important not just to look at the trade impact, but also to, of course, look at the way financial markets have moved in response to the news on trade and that impact.”
On global economy:
“As the past few weeks demonstrate, the global economic environment remains an uncertain one. Interest rates are not on auto-pilot. They cannot be. Instead, the MPC (Monetary Policy Committee) must continue to respond carefully to the evolving economic circumstances and the outlook for inflation in the UK.
Whatever happens, the MPC will continue to set bank rate to ensure that inflation returns sustainably to the 2% target in the medium term.”
On disinflation:
“My first key message is that disinflation in domestic price and wage pressures is continuing. While headline inflation is expected to rise in the near term, we do not expect that to persist.”
DAVE RAMSDEN, BANK OF ENGLAND DEPUTY GOVERNOR
On productivity:
“I am worried that we’re not going to see that recovery in productivity and supply, which is a kind of fundamental judgment to our baseline forecast. If that on its own happens, that would tend to push inflation up relative to baseline forecast.”
(Reporting by UK Bureau; editing by William James)
