By Paul Hannon

It is too early to be certain of the impact higher U.S. tariffs will have on U.K. inflation, and therefore the right policy response, Bank of England Deputy Gov. Sarah Breeden said Thursday.

U.S. President Trump has imposed fresh tariffs on imports from the U.K. and most other countries, although he announced Wednesday that some would be suspended for 90 days.

Speaking on a webcast hosted by MNI, Breeden said that even with those changes, the increase in tariffs has been "the most significant change in trade policy in a century."

While those tariffs will cool the U.K. economy, Breeden said they wouldn't have a "clear cut" impact on inflation.

"I would expect tariffs to lower economic activity," she said. "But it's too early to call the overall impact on inflation and hence the appropriate monetary policy response."

Breeden said trade diversion as Chinese and other businesses cut prices to find new buyers outside the U.S. could cool inflation. But a weakening of the pound against the U.S. dollar could have the opposite effect.

"So far sterling has not weakened, but it could change," she said.

Breeden said much would depend on the actions of other countries, with retaliatory increases in tariffs possibly adding further barriers to the international movement of goods and push prices higher.

"Supply chain disruptions could lead to increased inflationary pressures," she said.

Meanwhile, the negative impact on growth will likely weaken inflationary pressures.

"Trade policy uncertainty can have a chilling effect on business and consumer behaviors," she said.

Write to Paul Hannon at paul.hannon@wsj.com

(END) Dow Jones Newswires

April 10, 2025 09:46 ET (13:46 GMT)

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