The Bank of England has officially cut interest rates for the second time this year, lowering the base rate from 4.5% to 4.25%.
The move comes as the Bank warns that Donald Trump’s ongoing trade war is dragging on global growth, with knock-on effects for the UK economy.
The Monetary Policy Committee voted by a majority of 5-4 to cut interest rates to 4.25%
The Bank said that it expects an increase in inflation this year. It is likely to rise temporarily, to 3.7%, partly because of higher energy prices. Inflation is expected to fall back to the 2% target after that
The Bank said that the economy may not evolve as expected. Changes in global trade tariffs mean the outlook for inflation is particularly uncertain at the moment.
How much and in what direction tariffs impact the prices of UK goods, and therefore inflation, will depend on what policies are decided, and how countries, businesses and consumers will respond and promised to monitor this closely.
On the one hand, increases in global trade tariffs could mean that inflation is lower than expected if it means some countries lower the prices of the goods they sell to the UK. On the other hand, inflation could also be higher than expected, for example, if companies have to change where and how they supply goods, and their costs go up in the process.
