The Bank of England is widely expected to cut its key interest rate by 0.25 percentage points on Thursday as US President Donald Trump’s planned tariffs threaten to slow economic growth.
This follows the Federal Reserve’s decision to freeze US borrowing costs on Wednesday and the European Central Bank’s rate cut last month for the eurozone.
The Bank of England is set to reduce its rate to 4.25 percent in a decision scheduled for 11:02 GMT, two minutes later than usual to mark the 80th anniversary of Victory in Europe Day.
With the rate cut already factored into market expectations, investors will be looking for any shifts in language from the Bank’s Monetary Policy Committee that may suggest further cuts this year.
“While a rate cut is widely anticipated, the pound’s reaction will depend on the BoE’s communications,” noted Enrique Diaz-Alvarez, chief economist at financial services firm Ebury. He expects the bank to lower its growth and inflation projections for 2025, with the committee likely acknowledging that US tariffs will dampen UK growth and reduce price pressures.
With global trade tensions pushing oil prices lower, analysts predict inflation will retreat. Britain is facing 10 percent tariffs on most goods exported to the US, its second-largest trading partner after the EU.
Bank of England governor Andrew Bailey has warned that Trump’s trade policies could hurt the UK economy, even if the country avoids the heaviest tariffs.
London is also negotiating a post-Brexit trade deal with Washington, which may see levies reduced in exchange for easing concerns over Britain’s digital services tax on US tech giants.
At its last meeting in March, the Bank of England kept its main interest rate at 4.5 percent after three rate cuts in seven months, amid sluggish economic growth in the UK.
AFP
