MNI BRIEF: BOE Dhingra Sees US Tariff Price Impact Cushioned
MNI (LONDON) - Bank of England Monetary Policy Committee member Swati Dhingra on Wednesday highlighted the diverse effects from US tarifff increases on consumer prices and she downplayed the risks of a persistent inflationary impact.
Speaking at a NIESR event, she said that rather than heading for disorderly trade fragmentation the world may be heading to a more orderly fragmentation and the evidence suggested that this should not result in enduring higher inflation, with trade diversification and currency movements cushioning the impact.
"The direct effect of US import costs and dollar strengthening are likely to be offset by reduced global price pressures. Trade diversion away from the US would reduce global price pressures for the UK and the dampening of global economic activity from increased trade barriers and uncertainty would also subdue international price growth," she said. Dhingra highlighted how tricky it is to factor trade fragmentation into monetary poiicy decisions, with any rate hikes in response to sharp price spikes in some sectors likely to deter future investment and to add to future vulnerabilities.