Bank of England Governor Andrew Bailey has expressed concern that economic uncertainty will persist despite the U.K. becoming the first to strike a trade deal with the U.S. under Donald Trump’s global tariff framework. This article covers Bailey’s comments, the latest monetary policy decision, and the underlying risks facing the U.K. economy.
Trade Deal Fails to Eliminate Global Uncertainty
In an interview with CNBC, Bailey welcomed the new U.K.-U.S. trade agreement but said it doesn’t shield the British economy from broader global risks. “There’s more uncertainty now than there was in the past,” he said, referring to the effects of the U.S. tariff regime that continues to influence trade flows far beyond bilateral agreements.
While the direct deal with Washington is a positive signal, Bailey emphasized that the U.K.’s openness means it is vulnerable to global supply chain disruptions and trade tensions that extend beyond its borders. “We are looking at tariff levels that are probably higher than they were beforehand,” he noted, suggesting this new reality is far from stable.
Repeated Emphasis on Uncertainty in Central Bank Report
The Bank of England’s latest Monetary Policy Report underscores the theme. The term “uncertainty” appeared 41 times across the 97-page document — up from 36 mentions in February. The increase reflects heightened concern about the economic outlook, despite positive developments in trade.
Divided Vote on Interest Rate Cut
The central bank cut its key interest rate by 25 basis points to 4.25% in a sharply divided vote. Of the nine-member Monetary Policy Committee, five supported the cut, two voted for no change, and two pushed for a deeper 50 basis point reduction.
Bailey downplayed suggestions that the outcome leaned hawkish, instead pointing to a balanced risk environment. “There are risks on both sides here,” he said, highlighting the potential for both weaker demand and lingering inflationary pressures.
Risks Include Demand Weakness and Persistent Price Pressures
On one side, Bailey warned of the possibility that consumer and business demand could underperform expectations, potentially dampening inflation. On the other, he flagged risks of inflation persistence due to factors like elevated wages and energy costs, combined with constrained supply capacity in the U.K. economy.
“We could get a much more severe weakness of demand than we were expecting,” he said. “But there’s also a risk that inflation effects remain sticky, especially in areas like wages and energy.”
As the U.K. navigates a complex economic environment shaped by both internal and global forces, Bailey’s message is clear: uncertainty remains a dominant factor, and policy decisions will need to remain flexible and responsive in the months ahead.
