The markets are betting on the Bank of England cutting interest rates by a quarter of a percentage point when it meets this week, but some economists say the Bank must go further.
The Bank of England is poised to cut interest rates on Thursday amid growing concerns over the hit to UK jobs and growth from Donald Trump’s global trade war.
Threadneedle Street is expected to reduce its key base rate from the current level of 4.5%, with financial markets suggesting an almost 100% chance of a quarter-point reduction. However, some economists – including a former Bank deputy governor – have argued that a bigger half-point cut is needed to help businesses and households in the face of the worsening global outlook.
Andrew Bailey, the Bank’s governor, warned at last month’s International Monetary Fund meetings in Washington that the UK economy faced a “growth shock” as a result of Trump’s policies. The IMF downgraded its 2025 growth forecast for the UK to 1.1%, from the 1.6% it had been expecting earlier this year pre-tariffs announcement.
Speculation is rife that up to three members of the Bank’s rate-setting monetary policy committee could push for a larger rate reduction this week, including the external economist Swati Dhingra, who has long advocated for deeper cuts in borrowing costs.
Analysts at Morgan Stanley predicts that interest rates could fall to as low as 3.25% by the end of this year.
Interest rates set to fall at fastest rate since UK’s financial crisis
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