Market News

BY Henry Saker-Clark, PA Deputy Business Editor

Interest rates are expected to come down further in the coming months, the governor of the Bank of England said.

Andrew Bailey also highlighted weakness in the UK labour market amid increased economic uncertainty in the face of global trade tensions.

The comments came as the Bank chief faced questions along with other central bank bosses at the ECB (European Central Bank) Forum in Portugal.

Last month, the Bank of England held interest rates at 4.25% after four cuts over the past year, bringing it from a recent peak of 5.25%.

But Mr Bailey indicated that this could drop further amid pressure on economic growth and the UK labour market.

He said: “Are we going to get second-round effects from this pick-up in inflation?

“We don’t know.

“There are signs of softening in the labour market but we still have got to see more evidence.

“But the direction of interest rates continues to be downwards.”

Mr Bailey also indicated that it was still too soon to see a clear impact from recent changes in tariff policy on inflation in the UK.

In April, US President Donald Trump launched a significant jump in tariffs on imports into the US but has since agreed separate trade deals with nations including the UK, which have reduced the impact of this on certain sectors.

Some economists have also suggested that weaker demand for global goods from the US could have a deflationary impact on the UK, as producers in Asia and other areas reduce prices in order to sell goods abroad.

“It’s a bit too soon to see price effects coming through from tariffs and the reactions, and this could still go either way,” he said.