The Bank of England has cut benchmark rates by 25 basis points (bps), setting the Bank Rate at 4.25%. This decision arrived the day after the US Federal Reserve held rates steady, primarily due to economic uncertainty.
According to the Bank, the decision to cut was close, as the vote was 5 to 4. Two members wanted to cut rates by 50 bps, and two wanted to hold rates steady at 4.5%.
In the policy summary, the Bank said that there has been substantial progress in tackling inflation and “previous external shocks” have receded. At the same time, GDP growth has slowed since the middle of 2024. Twelve-month CPI inflation fell to 2.6% in March from 2.8% in February.
Concerns about global growth appear to have swayed the Bank’s decision. This is largely due to the aggressive tariff policy instituted by the US.
The Committee reaffirmed its commitment to maintaining a sufficiently restrictive policy to reach its 2% inflation target.
The rate change arrived on a day when the UK is expected to announce a significant trade deal with the US. Details are expected to be revealed later today. Any agreement between the two countries could improve the prospects of the UK economy.
US President Donald Trump foreshadowed the announcement on Truth Social, describing the agreement as “full and comprehensive” and adding that it was a great honor that the UK would be their first trade announcement.
Following the post on the UK trade agreement, President Trump lambasted US Federal Reserve Chairman Jerome Powell as a “fool” who does not have a clue.
