Higher for longer with tariffs, port fees and German spending

The BOE left its policy rate unchanged at 4.5% . It continues to pursue a “gradual and careful” approach. In a hearing in the European Parliament, the ECB's Lagarde reiterated that uncertainty over the trade policy environment makes it impossible to commit to a predetermined path. According to the ECB, a 25% US import tariff on EU goods would lower Eurozone GDP growth and raise inflation by 0.5pp. We conclude the same for GDP growth, but come to a much higher inflationary impact. Upcoming US port fees on China-linked shipping and obligations to use US ships for US exports have the potential to create inflationary pressures and disrupt global supply chains. German spending plan would lift growth and inflation.