Higher US tariffs could weigh on UK inflation, says BoE's Greene
By Benjamin Chiou
Date: Tuesday 01 Apr 2025
(Sharecast News) - Megan Greene from the Bank of England said on Tuesday that additional US import tariffs could actually lessen inflationary pressures in the UK, despite concerns that an escalating trade war will push up prices.
Greene, who was appointed to a three-year term on the Monetary Policy Committee in mid-2023, said at a Royal Economic Society event that while tariffs are inherently inflationary, "there is a lot of diversion" depending on how trade dynamics change and the resulting impact on exchange rates.
For example, if countries targeted by new tariffs choose to divert products away from the US at discounted rates to new markets like the UK, the impact "could be disinflationary and could happen fairly quickly", she said.
Nevertheless, Greene, a former economist at Kroll, said that inflationary pressures haven't eased quite as expected in the UK, requiring a continued cautious approach by the BoE.
"Monetary policy has to bear on the economy, open up an output gap, and that brings inflation down to the 2% target [...] The disinflationary process continues to be under way, but actually some of the indicators of underlying inflation persistence haven't faded as I might have expected," she said.
Greene also addressed rising consumer expectations around inflation over the past six months, which she labelled "a concern".
"Central banks really worry when you start to see inflation expectations rise beyond what you could explain and I don't think we're there yet, but it is important to keep inflation expectations well anchored," Greene said.
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