Bank of England cuts rates by 25 basis points as widely expected

The Bank of England cut its main interest rate by 25 basis points from 4.50% to 4.25% on its May monetary policy meeting on Thursday, which was also the first policy meeting after President Trump announcement of large packages of trade tariffs on most of world countries last month shook the world.

The decision was widely expected, as the UK policymakers remain concerned about the depth of negative impact from US tariffs on global economic growth, although they were not united in decision, as four MPC members voted for 0.25% rate cut, two for 0.50% cut, while two policymakers were for unchanged rates.

The turmoil that US global tariff announcement caused in the global economy, prompted the IMF to downgrade growth forecast for Britain and most of developed economies and contributed to the current stance of the central bank, which includes careful approach and gradual further adjustments of the monetary policy.

The Bank of England followed the US Federal Reserve and cut interest rates by the same amount in past one year, but less than the European Central Bank which faced higher pressure from high wage growth and inflation stubbornly holding above the central bank’s target.

The BOE is likely to keeps its rhetoric unchanged and stick to careful and gradual approach to interest rates in the near future, with economists expecting borrowing cost to drop towards 3.50% by the end of the year and inflation to return to 2% target in the first quarter of 2027.