The Bank of England has reduced interest rates to their lowest level in two years, amid warnings that a deepening global trade dispute could hinder economic growth over the next three years. The UK’s base rate has been cut from 4.5% to 4.25%, following a period of easing inflationary pressures in recent months.
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Andrew Bailey, Governor of the Bank of England, explained: “Inflationary pressures have continued to ease so we’ve been able to cut rates again today.” The central bank also upgraded its UK growth forecast for 2025 to 1%, up from a previous estimate of 0.75%, citing a stronger-than-expected start to the year.
However, the Bank warned that newly announced US tariff plans are likely to negatively impact global trade, reducing the UK’s growth by an estimated 0.3 percentage points through to 2026. This marks a downward revision of the Bank’s previous projection for that year.
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The majority of the negative impact is expected to result from a decrease in US demand for British exports and a broader slowdown in global economic activity, according to the Bank’s latest Monetary Policy Report. The central bank emphasised the need to remain responsive to further developments in international markets.
