Interest rates LIVE: Bank of England urged to cut interest rate to 4%
The Monetary Policy Committee (MPC) will meet today to determine whether the Bank of England Base Rate will rise, fall, or remain the same. Most experts predict a quarter-point reduction from 4.5% to 4.25% to give the economy a boost after President Donald Trump’s tariff turbulence.
The base rate significantly impacts the cost of mortgages and loans, and influences the interest rates banks offer on savings accounts. It peaked at 5.25% in late 2023, but policymakers have reduced it to 4.5% in the months since as inflation dropped to more manageable levels. It’s currently rising at a pace of 2.6% - far lower than the 11% highs seen during 2022’s energy crisis. The Bank of England typically raises interest rates when inflation is high to curb spending and slow price increases.
Markets expect inflation to tick up again over the summer as the effects of Rachel Reeves’s Autumn Budget begin to filter through. However, the threat of a demand shock from Trump’s tariffs could prompt the Bank to prioritise the risk to economic growth, potentially leading to a cut in the Base Rate today.
As it stands, markets have priced in three potential cuts to be made in 2025, up from two.
Some economists have urged the MPC to cut rates even further to 4% rate instead. The Institute of Economic Affairs' Shadow Monetary Policy Committee (SMPC) said: “The SMPC is concerned about the effect of US tariffs, with broad agreement that they will lower economic growth and raise inflation, though the latter is mainly in the US.”
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Experts at AJ Bell have suggested that the Bank of England's first rate decision since Liberation Day looks "almost certain" to deliver a cut.
Laith Khalaf, head of investment analysis at AJ Bell, said: “Donald Trump’s tariffs have caused a massive reappraisal of the future path of UK interest rates. As things stand, markets are focusing on the collateral damage to the UK economy rather than the potential for a trade war to ignite inflation once again."
Subsequently, Mr Khalaf said the market is now assigning a 50% chance to the base rate dropping to 3.5% or lower by the end of this year.
However, he added: "No one should ink that onto their calendar, because right now the ultimate shape of US trade policy, and its economic effects, are about as clear as a muddy puddle in the dead of night. Forecasts are by their nature vulnerable to correction by unfolding economic reality, and that applies in spades right now.
“Donald Trump may not have intended to liberate UK mortgage holders from high rates, but his tariff announcements have done just that."
Most experts predict the MPC to cut the Base Rate to 4.25% this month.
The Bank's governor Andrew Bailey has been keen to stress that the committee wants to take a "gradual and careful approach" to reducing rates while monitoring changes in the UK and global economy.
However, Trump’s recent tariff turbulence has heightened fears about economic growth, leading many to anticipate the MPC lowering rates to give the country a boost.
The Governor of the Bank of England typically presents their recommendation on whether to maintain, increase, or decrease the base rate a day before the official announcement.
This recommendation is then subject to a vote by the Bank's Monetary Policy Committee (MPC), which is responsible for setting the rates.
As expected, the majority vote prevails, and in the event of a tie, the Governor casts the deciding vote.
The minutes of this month's meeting and the final decision will be released at 12pm.
Good morning and welcome to our live blog, where we'll be bringing you the latest on today's base rate decision.
Daily Express
