Bank of England cuts interest rate by 0.25 pp to 4.25%

“Prospects for global growth have weakened as a result of this uncertainty and new tariff announcements, although the negative impacts on UK growth and inflation are likely to be smaller,” the central bank said in a release.

The decision comes ahead of a trade deal between the United States and the United Kingdom, to be announced by President Donald Trump.

There has been substantial progress on disinflation over the past two years, as previous external shocks have receded, and as the restrictive stance of monetary policy has curbed second-round effects and stabilised longer-term inflation expectations, the central bank said. UK inflation stands at 2.6 per cent now.

That progress has allowed the bank’s monetary policy committee (MPC) to withdraw gradually some degree of policy restraint, while maintaining bank rate in restrictive territory so as to continue to squeeze out persistent inflationary pressures, it said.

Progress on disinflation in domestic price and wage pressures is generally continuing, the bank noted.

The MPC saw two illustrative scenarios. In the first, there could be weaker supply and more persistence in domestic wages and prices, including from second-round effects related to the near-term increase in consumer price index (CPI)-based inflation.

In the second, inflationary pressures could ease more quickly owing to greater or longer-lasting weakness in demand relative to supply, in part reflecting uncertainties globally and domestically, the bank added in its release.

ALCHEMPro News Desk (DS)