BoE's Dhingra: If the US Dollar goes up, we have to worry about rate dynamics and UK inflation
|Bank of England (BoE) Monetary Policy Committee (MPC) member Dr. Swati Dhingra cautioned that the United Kingdom (UK) could be facing a rocky road on inflation, especially as knock-on effects from the Trump administration's tariff-heavy trade policies reverberate through the global economy.
However, this isn't Dr. Dhingra's base case scenario, noting that a rapidly appreciating US Dollar (USD) would be the key spark for UK inflation metrics, something that doesn't appear to be happening to any significant degree.
Key highlights
My vote for a 50 bps rate cut was partly to make a statement on the direction of the economy.
We might see some cost pass-through from US tariffs, but I argue that the number would be quite small.
I won't rule out a scenario where global trade breaks up and the UK suffers inflation, but I don’t think that's where we're headed.
My working hypothesis is that dollar depreciation is not going to put immense pressure on UK import prices.
If the dollar starts to really go up, we have to worry about what exchange rate dynamics do for UK inflation.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.