Former Bank of England Deputy Governor Charlie Bean recommends that UK interest rates should decrease to 4% in May to protect the economy from Donald Trump’s extensive trade tariffs. The current global stock market downturn has caused business and consumer confidence to deteriorate thus prompting the recommendation for a half-point interest rate reduction.
The “crazy situation” caused by Trump’s tariffs requires the central bank to take bold action according to Bean who previously supported higher interest rates. The prolonged uncertainty will cause businesses to delay investments while consumers reduce spending which might push the UK into economic recession.
The Bank should take immediate action with an emergency rate reduction according to David Blanchflower before its 8 May meeting. The decline of consumer confidence requires immediate attention because it leads directly to a recession according to Blanchflower.
The current market expectations indicate a 0.25% rate reduction but Bean advocates for a stronger action similar to the 1.5% emergency reduction implemented during the 2008 crisis. The Office for Budget Responsibility predicts that UK economic contraction will reach 1% if the trade conflict continues.
