The Bank of England estimated that it had cut interest rates to 4.25% to 4.25% as it was ready for the impact of Donald Trump’s trade policy, but it did not reach a pre-cut route to further cuts.
The fourth rate cut since August, a split decision on Thursday, comes ahead of the announcement of the US-UK trade agreement, which London hopes to reduce tariffs on UK exports.
The BOE’s nine-person monetary policy committee was split into five members who supported the quarter point cut, two who supported the larger half cut, and two who wanted to keep the fee at 4.5%.
“We were able to cut our fees again today as the pressure on inflation continues to ease,” said BOE Gov. Andrew Bailey.
However, he added: “Interest rates are not autopilots. They can’t.”
The pound moved beyond $1.33 after voting, and voting shifts and language on interest rate reductions have led traders to trim rate cut bets.
Gold leaf yield over the two years rose 0.06 percentage points at 3.87%.
“Overall, that’s a surprise for the hawk,” ING’s Forex strategist Francesco Pesor emphasizes that BOE’s chief economist Huw Pill voted without any changes.
BOE predicts that the UK economy will expand by 1% this year, and will expand by 1.25% more than expected in 2026.
This week’s MPC meeting was the first since Trump announced the so-called release day tariffs in April.
UK officials suggest that Thursday’s deal with Washington may be limited in scope and may focus primarily on the automotive and steel industries. Bailey said it will be “welcome” news that will help reduce uncertainty.
