BANK OF ENGLAND (BoE) policymaker Megan Greene said US president Donald Trump's tariffs would probably lower, rather than raise, inflation in Britain, although there were big uncertainties around the plan and the impact of a recent UK tax rise for employers.
"We have tariffs, and none of us have any idea what they'll look like when the dust finally settles," Greene said during a discussion with the Atlantic Council think tank 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.
Asked about what she was watching ahead of the BoE's interest rate decision next month, Greene said she was concerned about Britain's weak productivity growth and supply-side constraints on the economy.
"There's also a big uncertainty around the implications of the budget on the economy, and particularly higher labour costs," she said.
Labour costs for British firms rose this month after chancellor Rachel Reeves' increase in social security contributions came into effect. The minimum wage also rose by almost 7 per cent.
Earlier this week, BoE Governor Andrew Bailey said the central bank needed to take the risk to growth from global trade tensions "very seriously", given Britain's reliance on foreign trade and investment.
Financial markets have assigned a 96 per cent probability to the BoE cutting rates by a quarter-point to 4.25 per cent at its next announcement on May 8.
Greene also said weaker growth in Britain's economy should help bring inflation back to the BoE's 2 per cent target. She said the labour market was weakening only slowly but added that wage growth should come down.
(With inputs from Reuters)
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