US duties slow UK inflation

Megan Green, a member of the Bank of England's Monetary Policy Committee (MPC), said she is taking a cautious stance on interest rate changes. She explained this by concerns about supply chain constraints, high wage growth, and persistent inflation in the services sector.

Green believes that Trump's tariff policy in fact carries more of a disinflationary risk than an inflationary one. In other words, it will result in higher prices in the United States and slower price growth in Britain due to the diversion of cheap Asian exports, a weaker dollar, and lower demand caused by Britain's sluggish economic growth.

The MPC has been cutting rates every quarter since the summer of 2024. The imposition of US tariffs could accelerate the pace this year. Investors expect at least three more cuts by the year-end, with a 50% chance of the fourth one. The Bank of England is due to announce its next decision on May 8.

The pound remained steady against the dollar at 1.33700 on Tuesday, approaching a 3-year high. UK 10-year bond yields rose by 3 basis points to 4.60%.