Jamie Spencer
Bank of England (BoE) Governor Andrew Bailey called on the United States to address global economic concerns through diplomatic dialogue rather than import tariffs. Speaking to British lawmakers on Wednesday, Bailey emphasized the importance of multilateral cooperation following President Donald Trump’s decision to impose fresh tariffs.
Bailey Advocates for Multilateral Trade Solutions
Bailey highlighted his discussions at a recent Group of 20 meeting in South Africa, stressing that economic imbalances should be tackled in a multilateral forum rather than through unilateral trade actions.
“If you think the world economy is somehow out of balance, the place to address those balances is in a multilateral forum, not by bilateral action,” Bailey told the Treasury Committee in parliament.
Trump’s decision to impose 25% tariffs on imports from Mexico and Canada, alongside new duties on Chinese goods, has raised fears of slower global economic growth and increased U.S. inflation.
Concerns Over U.S. Trade and Fiscal Policy
Bailey pointed out that China was running a “very large” current account surplus, while Germany had just announced a substantial 500-billion-euro ($538.6 billion) infrastructure and defense investment plan.
“The U.S. has to answer the question: yes, you’ve got a current account deficit. You’ve also got a very big fiscal deficit, and you’re financing that current account by external capital,” he said.
Bailey also warned that a potential U.S. withdrawal from the International Monetary Fund and World Bank would be “very damaging for the world,” though Treasury Secretary Scott Bessent has expressed support for multilateral approaches.
Debate Over Future BoE Rate Cuts
The BoE’s recent decision to cut interest rates for the third time since August, lowering its benchmark rate to 4.5% from 5.25%, was another major focus of the discussion.
While most policymakers described their stance as “careful” regarding further rate cuts, a minority preferred the word “cautious,” signaling concerns about inflation remaining higher than expected.
Bailey, who favored the “careful” approach, noted that inflation was expected to rise temporarily but did not foresee it leading to long-term inflationary pressures.
“The question we had to address was: is this going to have second-round effects or not?” Bailey said. “Set against a weakening pattern of the economy, probably less likely.”
Differing Views Among BoE Officials
External Monetary Policy Committee (MPC) member Alan Taylor advocated for using “gradual and careful” to reflect both upside and downside risks to inflation.
However, fellow MPC member Megan Greene expressed a preference for “cautious,” stressing the need to be wary in unwinding restrictive monetary policy.
BoE Chief Economist Huw Pill also signaled restraint, stating that he did not see room for rapid rate cuts this year.
Trade Tensions and Policy Uncertainty
As Trump’s tariffs spark concerns over economic stability, Bailey’s comments reinforce the BoE’s preference for multilateral cooperation in trade policy. Meanwhile, internal BoE debates over rate-cut messaging suggest policymakers are treading carefully in balancing inflation risks and economic growth concerns.
