The Bank of England (BoE) cut interest rates today (Thursday 08 May) in response to growing fears that Donald Trump’s erratic trade policies are threatening UK jobs and economic growth.
The base rate has been cut by a quarter point, from 4.5% to 4.25%
The intervention follows a fresh escalation in Trump’s global trade war, which many believe could trigger a significant downturn in international trade. Analysts warn that his tariff-led approach will push up prices for US consumers and increase the risk of recession, with knock-on effects for economies worldwide.
UK business and consumer confidence have slumped. Inflation fell more than expected in March to 2.6%, but it is forecast to climb to 3.7% this summer due to rising energy and food prices, well above the Bank’s 2% target. Meanwhile, signs of a cooling labour market suggest businesses are holding back on hiring as they face higher taxes and weaker consumer demand.
Despite pressure from the US, the Federal Reserve yesterday extended its rate holding pattern, keeping its benchmark lending rate unchanged at a range of 4.25% to 4.5%. In contrast, the BoE today chose to act more decisively to cushion the UK economy from the fallout of global trade tensions.
