The Bank of England (BoE) is expected to cut interest rates this Thursday in response to growing fears that Donald Trump’s erratic trade policies threaten UK jobs and economic growth.
Markets are all but certain that the base rate will be cut by a quarter point from its current 4.5%. However, some economists – including a former deputy governor of the Bank – argue a sharper half-point cut is needed to support struggling businesses and households amid a deteriorating global outlook.
The intervention follows a fresh escalation in Trump’s global trade war, which many believe could trigger a significant downturn in international trade. Analysts warn that his tariff-led approach will push up prices for US consumers and increase the risk of recession, with knock-on effects for economies worldwide.
UK business and consumer confidence have slumped. Inflation fell more than expected in March to 2.6%, but it is forecast to climb to 3.7% this summer due to rising energy and food prices, well above the Bank’s 2% target. Meanwhile, signs of a cooling labour market suggest businesses are holding back on hiring as they face higher taxes and weaker consumer demand.
Despite pressure from the US, the Federal Reserve is expected to hold rates steady. In contrast, the BoE appears poised to act more decisively to cushion the UK economy from the fallout of global trade tensions.
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