BoE Expected to Cut Rates Amid Trade Concerns

The Bank of England (BoE) is anticipated to reduce its key interest rate by 0.25 percentage points to 4.25% this Thursday, marking a significant shift from its previous stance of maintaining rates at 4.5% in March. This decision underscores the growing apprehension regarding the potential adverse effects of US tariffs, imposed by President Donald Trump, on the British economy.

Global Trade Tensions and UK Economic Outlook

Governor Andrew Bailey highlighted in April the central bank's vigilance over the possible "growth shock" linked to escalating global trade tensions, despite dismissing the likelihood of an imminent UK recession. Economists are particularly concerned that Trump's trade policies could elevate global prices and disrupt export flows, thereby dampening the UK's economic momentum.

Economic Indicators and Market Expectations

Despite a 0.5% rise in UK GDP in February and a drop in annual inflation to 2.6% in March, which was below forecasts, analysts argue that these figures do not alter the overarching economic narrative. The prevailing uncertainty in international markets continues to cast a shadow over domestic economic prospects. While a 25-basis point cut is widely expected, there is speculation that some Monetary Policy Committee members might advocate for a more substantial reduction.

In an unusual move, the BoE will announce its decision at 1:02 pm CET on Thursday, adjusting the timing to observe a two-minute silence commemorating Victory in Europe Day.