Bank of England Poised to Cut Interest Rates Amid Rising Global Trade Tensions

The Bank of England (BoE) is widely expected to trim its benchmark interest rate by 25 basis points on Thursday, as concerns grow over the impact of U.S. President Donald Trump’s proposed tariffs on global economic growth.

This anticipated move would bring the UK’s key interest rate down to 4.25%, aligning with recent dovish trends among major central banks.

The expected rate cut comes on the heels of the U.S. Federal Reserve’s decision to hold interest rates steady and the European Central Bank’s rate reduction last month, as global policymakers respond to mounting economic uncertainty.

The BoE’s decision is scheduled for 11:02 GMT—two minutes later than usual—as the UK observes a moment of silence to commemorate the 80th anniversary of Victory in Europe Day (VE Day).

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With the rate cut already priced in by financial markets, the focus now shifts to the Bank’s tone and forward guidance. Investors will closely scrutinize any shifts in the language used by the BoE’s Monetary Policy Committee (MPC), which could signal the likelihood of further rate reductions later in the year.

“While the Bank of England is universally expected to cut on Thursday, the key to the reaction in the pound will be the bank’s accompanying communications,” said Enrique Diaz-Alvarez, chief economist at Ebury.

He added that the BoE is likely to downgrade both its inflation and GDP forecasts for 2025, particularly in light of Trump’s tariffs that could further strain UK growth and suppress inflation.

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The UK now faces 10% tariffs on most of its exports to the U.S.—its second-largest trading partner after the EU. Governor Andrew Bailey has previously warned that these trade barriers, even if selectively applied, could inflict significant damage on Britain’s already fragile economy.

Complicating matters further, London is still negotiating a post-Brexit trade agreement with Washington. Reports suggest that part of the talks involve easing tariffs in exchange for adjustments to the UK’s digital services tax—a levy that has impacted major U.S. tech companies.

At its last meeting in March, the BoE held rates steady at 4.5%, after cutting rates three times over the prior seven months. The UK economy continues to struggle under the weight of tepid growth and subdued inflation, both exacerbated by falling oil prices and global trade friction.

As the BoE prepares its next move, all eyes will be on whether Thursday’s decision marks the beginning of a new easing cycle—or simply a precautionary step amid an increasingly volatile global economic landscape.