FTSE gains after BoE chief says Trump tariffs might CUT inflation (2025)

The FTSE 100 defied global stock market misery today after a Bank of England policymaker said US tariffs and the sliding dollar should cut inflation.

The UK's bluechip index edged up this morning after Megan Greene, a member of the Monetary Policy Committee, gave an assessment of the consequences of Donald Trump's trade war.

She said the situation was highly uncertain, but pointed to the potential for exports that would have gone to America to be diverted to the UK at lower prices.

In an interview with Bloomberg, Ms Greene also suggested the tumbling value of the US dollar would suppress inflation here.

And she risked wading into the standoff between Mr Trump and the head of the Federal Reserve, Jerome Powell - whom the president has branded a 'loser' for refusing to cut interest rates.

Ms Greene said independence was 'absolutely crucial' for the credibility of central banks.

The FTSE 100 was up a few points this morning, a far cry from the plunges seen in America overnight and better than seen across much of Europe.

Ms Greene said:'There's a tonne of uncertainty around this, but there are both inflationary and disinflationary forces.'

Reinforcing hopes that the Bank will cut interest rates from 4.5 per cent to 4.25 per cent next month, she insisted: 'The tariffs represent more of a disinflationary risk than an inflationary risk.'

The US has imposed a 10 per cent import tariff on goods coming from the UK, a policy which also applies to many other countries. Keir Starmer is scrambling to strike a deal that could exempt cars and steel from higher 25 per cent global levies.

Ms Greene said potential outcomes like export substitution would likely push inflation down.

And 'trade diversion from other countries that are trying to find a new home for their markets, that also pushes down on inflation,' she added.

However, the risks in the opposite direction include 'a re-patterning of supply chains (that) can push up on inflation'.

And 'trade fragmentation writ large… tends to reduce knowledge spillovers. That reduces potential growth, that tends to be inflationary.'

She said that a recent surge in the value of the pound compared to the US dollar, if it were to continue, could also push down on inflation.

'If the dollar continues to depreciate on balance that would be disinflationary for the UK,' she said.

However, she added that it is 'too early to say where the dust settles on currencies'.

Ms Greene made some pointed comments in the context of the spat between Mr Trump and the Fed chief, which has spooked markets.

'Credibility is the currency of central banks and I think independence is quite an important piece of that,' she said.

'The target for the Bank of England is provided by The Treasury but we will hit our target.

'I think we can do so credibly because we are free to make the decisions that we believe will most effectively achieve that.

'I think central bank independence is absolutely crucial.'

Ms Greene also addressed the introduction of rising employer taxes, in the form of employer national insurance contributions (Nics).

She said there are 'no signs' of rising unemployment as a result of the policy, which came into force at the start of April.

With the increase in Nics, combined with a rising minimum wage, 'the big risk is that there could be a shakeout in the labour market. We could see unemployment tick up,' she said.

'There are no signs of that yet, actually, even though the Nics and the national living wage have come to be.'