MPC’s Dilemma: Global Uncertainty vs. Domestic Wage Slowdown

The Bank of England’s Monetary Policy Committee (MPC) faces a dilemma: navigating global uncertainty fueled by Donald Trump’s trade policies while considering domestic signals like an anticipated wage slowdown. Governor Andrew Bailey stated that the future path of interest rates is now more uncertain.
Bailey explained that the “fragmenting world trading system” is negatively impacting global growth and causing UK businesses to delay investment. He lamented that a long-established system of lower tariffs through trade agreements has been “blown up.”
However, a crucial factor providing some clarity for the MPC is the expected decline in UK wage growth. Bailey projected wage settlements to be around 3.7% to 3.8% by year-end, which could provide confidence for further rate cuts despite the external headwinds.