MNI BRIEF: Tariffs Shift Inflation Risks Down - BOE's Greene

Bank of England Monetary Policy Committee member Megan Greene, who has been among the more hawkish policymakers, gave guarded support on Friday to the view that inflation risks have shifted down, with the output gap starting to open up and some easing in the labour market.

While no-one knows where tariffs will end up, the new trade regime is shifting the balance of inflation risks to the downside, Greene said at an Atlantic Council event.

"The risk space has changed a little bit ... particularly around tariffs, I think the risk is now on the disinflationary side," she said, citing trade diversion from China, and adding that ultimately what happens to currencies would be key.

A likely downgrade to UK growth would widen the output gap, pushing down on inflation, she said, though she added that firms' year ahead pay growth expectations have "been stuck at around 4% ...  still above what would actually be consistent with a 2% inflation target.” (See MNI INTERVIEW: Financial Conditions Back BOE Easing - Aikman)