By William Schomberg
WASHINGTON (Reuters) -Bank of England Governor Andrew Bailey said on Thursday he was focused on an expected shock to economic growth from U.S. President Donald Trump’s import tariffs and retaliatory measures by other countries, but did not foresee a recession in Britain.
“We are certainly quite focused on the growth shock,” Bailey told CNBC television on the sidelines of the International Monetary Fund’s Spring Meetings in Washington.
The BoE has long been trying to balance Britain’s weak economic growth against a tight labour market and other factors pushing up on inflation.
“I think the trade issue is the new part of that story,” Bailey said.
Weak surveys of businesses published this week reflected uncertainty among companies although recent official gross domestic product data had been quite encouraging, he said.
“I don’t think UK economy is close to recession at the moment,” he said in response to a question by CNBC.
The IMF this week cut its forecast for British economic growth in 2025 to 1.1% from a previous estimate of 1.6%. But that remains stronger than the Fund’s projections for France, Germany and Italy.
Bailey said he hoped that an expected rise in inflation later this year – which could touch 3.7% under the BoE’s most recent forecasts, or almost double the central bank’s 2% target – would prove transitory.
Investors on Thursday assigned an almost 100% probability to the BoE cutting rates by a quarter of a percentage point to 4.25% on May 8 after the next scheduled Monetary Policy Committee meeting and see rates falling to 3.5% or 3.75% by the end of this year.
On Wednesday, Bailey said the BoE had to take “very seriously the risk to growth” from the global trade tensions, given Britain’s reliance on foreign trade and investment.
(Writing by William Schomberg in Washington; editing by David Milliken)
