Bank of England MPC Member Says Trump Tariffs Could Cut UK Inflation

Megan Greene, a member of the Bank of England’s Monetary Policy Committee (MPC), has suggested that a global trade war, driven by tariffs introduced by former US President Donald Trump, could help reduce inflation in the United Kingdom. Speaking at the Bank of England Watchers’ Conference, Greene explained her decision to vote for a 0.25 percentage point interest rate cut, highlighting the disinflationary impact such trade measures might have.

The MPC member noted that the outcome of the tariffs remains uncertain due to the interplay of inflationary and disinflationary forces. While constrained supply and elevated inflation expectations among consumers could continue to fuel price rises, Greene pointed out that diversion of goods originally destined for the US to the UK market, as well as a stronger pound reducing import costs, may offset some of these pressures.

Differing opinions were evident among the MPC, as the vote to cut interest rates narrowly passed by a 5-4 margin during the May policy meeting. The cut brought the rate down to 4.25 per cent, its lowest in two years. Not all panellists were in agreement, with Catherine Mann and Huw Pill favouring no change, while Swati Dhingra and Alan Taylor advocated a more aggressive reduction of 0.50 percentage points.

The cautious approach taken by the Bank was echoed by Clare Lombardelli, another MPC member and deputy governor, who commented on the gradual and careful reduction of policy restrictiveness. Like Greene, Lombardelli admitted to having been uncertain prior to the vote but ultimately concluded that a 0.25 percentage point reduction was justifiable due to progress in managing inflation and shifts in global trade conditions.

Market analysts remain divided on the Bank’s next steps, with previous predictions of successive rate cuts temporarily dampened by the central bank’s commitment to a measured approach. Investment firms such as Goldman Sachs and Morgan Stanley had anticipated more rapid monetary easing, yet the MPC appears determined to act cautiously in balancing inflationary challenges with broader economic concerns.

The wider implications of Trump’s tariffs continue to provoke debate, with some seeing opportunities for the UK to benefit from global trade realignments while others emphasise the risks of prolonged supply chain disruptions potentially exacerbating inflation.