Andrew Bailey, the Bank of England governor, is closely watching the anticipated decline in UK wage growth as a crucial factor that could pave the way for future interest rate cuts, even as Donald Trump’s trade policies inject global uncertainty. He told MPs he has “no evidence to doubt” a significant slowdown in wage settlements.
Bailey projected that wage settlements should be around 3.7% to 3.8% by the end of the year, a reduction that would be a “good percentage point below where we are now.” This anticipated moderation in domestic inflationary pressures is a key consideration for the Monetary Policy Committee.
Despite this domestic optimism, Bailey reiterated his concerns about the “fragmenting world trading system” and its negative impact on global growth and activity, acknowledging the challenges it presents for the UK’s interest rate outlook.