The Bank of England has lowered interest rates for the fourth time since August, now at 4.25%. This decision stems from concerns over weak growth and persistent inflation amid global trade challenges from U.S. tariffs. The Monetary Policy Committee's split decision surprised analysts, who anticipated a more decisive vote. The bank's growth forecasts were revised downward, projecting limited growth through 2027. The central bank noted the potential for tariffs to impact growth negatively while also easing inflation pressures in the short term. Governor Bailey highlighted the need for a careful approach given the unpredictable global climate.
The Bank of England has cut interest rates for the fourth time since August, lowering the base rate to 4.25% from 4.5%, as the central bank grapples with weakening growth, persistent inflation, and global trade disruptions driven by President Trump's tariff war.
Inflationary pressures have continued to ease, so we've been able to cut rates again today,” said Bailey. “But the past few weeks have shown how unpredictable the global economy can be. That's why we need to stick to a gradual and careful approach.
The Bank revised its UK growth forecast downward, projecting GDP to expand by 1% in 2025, 1.25% in 2026, and 1.5% in 2027, a notable downgrade from its previous outlook in February.
Though the global trade war poses a drag on growth, the MPC said it could exert downward pressure on UK inflation, especially as Chinese goods are rerouted to the UK and global energy prices soften.
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