LONDON, Feb 23 (Reuters) – High U.S. import tariffs appear to be here to stay and their full impact represent a meaningful change which is likely to take “many years” to be felt, Bank of England policymaker Alan Taylor said on Monday.
Speaking after U.S. President Donald Trump responded to the Supreme Court voiding most of his tariff increases from last year by imposing a 15% global levy on imports, Taylor said the impact of Washington’s shift under Trump remained to be seen.
“I think the fundamental thing to realise is those tariffs are here to stay at some kind of number that is a lot – an order of magnitude – bigger than it was two years ago,” Taylor said at an event organised by Deutsche Bank.
“So I think we should expect this shock to play out also over many years,” he added.
Taylor said there were some signs that China was diverting exports to elsewhere in East Asia and the European Union, with potential deflationary consequences, but that it was hard to know how significant the impact would be.
He was part of a four-strong minority on the BoE’s Monetary Policy Committee who sought to cut benchmark interest rates to 3.5% from 3.75% this month, partly because he saw a risk that inflation could in future persistently undershoot its 2% target.
On Monday, he said he would be concerned about underlying inflation pressures if they came in higher than expected “over and over” again, but he was not worried about January data in isolation, which showed faster-than-expected services prices growth.
The risk to the BoE’s forecasts were shifting towards lower inflation and higher damage to the economy from unemployment, Taylor said.
The BoE had two or three more quarter-point rate cuts to go before it was likely to need to pause, assuming there were no further fresh shocks to the economy, he added, echoing comments he made after this month’s rate decision.
(Reporting by William Schomberg; editing by David Milliken)
Comments