BoE MPC member Swati Dhingra suggested that the inflationary impact of rising global tariffs could be tempered by weaker economic growth.
She added that if the global economy undergoes a “fragmentation in an orderly way,” monetary policy might not need to react immediately as prices readjust to new geopolitical shifts.
However, she cautioned that in an “extreme scenario” where multiple major economies erect significant trade barriers similar to those proposed by the US, “severe strain on a few sources of supply” could lead to sharp price spikes, reminiscent of those seen following Russia’s 2022 invasion of Ukraine.
Despite the risks, Dhingra downplayed the likelihood of a severe disruption, noting that “the world economy seems to be moving closer to an orderly fragmentation.”
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