Investing.com -- The deputy governor of the Bank of England, Clare Lombardelli, indicated on Monday that the U.S. trade policy is likely to result in weaker growth and persistently low inflation in the U.K.
Lombardelli, during the Bank of England Watchers’ Conference in London, pointed out that increased tariffs and uncertain U.S. policies could decrease growth and inflation due to diminished demand and trade diversion, as other nations reduce their exports to the U.S.
She also noted that the underlying inflation pressures in the U.K. are on a downward trend. However, she stated that wage growth in the country is still too high to align with the bank’s 2% inflation target.
The deputy governor also mentioned that the recent appreciation of the pound against the dollar has led to lower imported inflation.
She warned that if global trade were to fragment in the long term, it could lead to a reduction in output and productivity and increase inflationary pressures.
Last week, the central bank reduced its key rate to 4.25% from 4.5%. Lombardelli expressed a balanced view about her own decision to vote for the cut, citing further gradual progress on disinflation and trade developments as her reasoning.