BoE’s Greene points out impact of US dollar exchange rate on UK monetary policy

Bank of England (BoE) Monetary Policy Committee (MPC) member Megan Greene emphasized the importance of exchange rate movements for British monetary policy during the interview to Atlantic Council in Washington on Friday. Analyzing the current situation, she noted the unusual dynamics of the US dollar, which, being a traditional “safe haven” in times of crises, showed a decline after the escalation of trade tensions initiated by Donald Trump.

Regarding the historical precedents, Green pointed to similar situations during the global financial crisis and the pandemic, when the dollar first declined and then strengthened. Given these factors, she believes it is too early now to draw definitive conclusions about the future of the US currency.

During the discussion of the upcoming interest rate decision scheduled for May 8, Green mentioned the exchange rate as a key factor in determining the central bank's actions. Lower import costs with a weaker dollar could have a deflationary effect on the British economy, helping to accelerate rate cuts. However, a strengthening dollar, on the contrary, will increase inflationary pressures and force the BoE to act more cautiously.