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Cheap imports from China should help bring UK inflation down to target by the middle of this year and help smooth the way for further interest rate cuts, according to a Bank of England policymaker. In a speech at the National University of Singapore, Bank rate-setter Alan Taylor said US President Donald Trump’s move to impose hefty trade tariffs on China have seen the country’s exporters cut prices to boost trade in the UK and Europe. He said this is helping push down on UK inflation, which he forecast would now fall from 3.2% currently to the bank’s 2% target within six months. This adds to inflation-busting measures in the government’s recent budget, including the move to cut £150 off household annual energy bills from April. Taylor said: ‘We can now see inflation at target in mid-2026, rather than having to wait until 2027 as in our previous projection. ‘I see this as sustainable, given cooling wage growth, and I now therefore expect monetary policy to normalise at neutral sooner rather than later. ‘Interest rates should continue on a downward path, that is if my outlook continues to match up with the data, as it has done over the past year.’ He said the Bank’s internal predictions that so-called trade diversion would lower UK inflation by 0.2 percentage points was ‘arguably quite conservative’. Exports from China to the US have fallen sharply in response to Trump’s trade war, with Chinese manufacturers seeking new customers elsewhere in the world to avoid punitive tariffs. Taylor said: ‘Exports that can no longer go to the US from China may now flow to other places, and the current data suggest this is indeed starting to happen, with no contraction in volumes, just a change in destination. ‘This would be a case of trade diversion. Overall, in theory, this may not fully offset trade destruction, but it seems so far to be mitigating the risk of a major decline in world trade.’ Taylor was one of five Monetary Policy Committee members at the Bank to vote for a rate cut last month, from 4% to 3.75% its lowest level in nearly three years. By Holly Williams, Press Association Business Editor Press Association: Finance source: PA Copyright 2026 Alliance News Ltd. All Rights Reserved.
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