Bank cuts base rate as it seeks to cushion UK from Trump's tariffs war

Bank of England policymakers have cut interest rates by a quarter of a point to 4.25% to cushion the UK economy against the impact of Donald Trump's trade war.

- Phillip Inman Heather Stewart

The widely expected move from the Bank's monetary policy committee (MPC), its fourth cut since last August, also carried a warning that the UK economy would slow by a further 0.3% over the next three years in addition to dramatic cuts to its forecasts made earlier this year.

In a blow to the chancellor, Rachel Reeves, the MPC said a combination of uncertainty surrounding the impact of US trade policy and clouds hanging over the UK economy meant growth would be almost stagnant for the rest of the year. Economic growth "is judged to have slowed and is expected to remain subdued in the near term", the Bank said.

In a split vote, with two of the nine-member MPC voting for a bigger 0.5 percentage point cut and two voting to hold at the current 4.5% level, the Bank signalled a high degree of caution about the number of interest rate cuts over the rest of the year.

Financial markets expect at least two further quarter-point cuts in borrowing costs this year.

However, concern that inflation could persist above a 2% target into 2026 led the National Institute of Economic and Social Research to forecast this week that the Bank would be limited to just one more cut in 2025.