THE BANK of England has reduced interest rates to 4.25 per cent, marking its second cut this year, as it warned that escalating global trade tensions, driven by US President Donald Trump’s tariff policies, are damaging the UK economy.
This decision came shortly before an anticipated UK-US trade agreement.
Alongside the rate cut, the Bank downgraded its economic growth forecast for 2026, indicating worsening prospects due to prolonged global trade uncertainty.
Officials at Threadneedle Street signalled that this instability, intensified by Trump’s trade war, is exerting sustained downward pressure on the UK’s economic performance and inflation, warranting lower borrowing costs to stimulate demand.
The Bank now expects the UK economy to grow by just 1.25 per cent in 2026, a drop from its earlier estimate of 1.5 per cent.
It warned that ongoing tariffs and broader uncertainty in international trade will likely shave 0.3 per cent off GDP over the next three years.
Markets have already priced in the likelihood of two further rate cuts before the end of the year, reflecting expectations of continued dovish monetary policy in response to global economic headwinds.
However, the minutes from the latest meeting of the Monetary Policy Committee (MPC) reveal growing division among its members.
Two policymakers advocated for a sharper rate cut to 4 per cent, while two others, including the Bank’s chief economist Huw Pill, argued that rates should remain unchanged to guard against persistently high inflation.
Governor Andrew Bailey explained the rationale behind the latest move, saying: ‘Inflationary pressures have continued to ease so we’ve been able to cut rates again today.
‘The past few weeks have shown how unpredictable the global economy can be. That’s why we need to stick to a gradual and careful approach to further rate cuts.
‘Ensuring low and stable inflation is our top priority.’
Lewisham lobby condemns Labour
CRIES of ‘Shame on Starmer! Shame on Reeves!’ echoed outside Lewisham Town Hall on Wednesday as protesters gathered to condemn Labour’s planned benefit cuts.
The demonstration, led by Disabled People Against Cuts (DPAC), Lewisham Trades Council, and other campaign groups, accused the party leadership of pursuing policies that would increase hardship and deaths among disabled people.
DPAC accused the government of misleading the public, claiming the total value of disability benefit cuts stands at £9 billion – not the £4.8 billion officially reported.
The group warned that changes to Personal Independence Payment (PIP) alone could plunge between 350,000 and 400,000 households into poverty, including 50,000 children, while severely affecting 1.5 million Deaf and disabled people.
Papula Peters of DPAC said: ‘This is the start of the abolition of the welfare state. Next it will be State Pensions, then they will bring in Health Insurance.’
She also warned that the return of Assisted Dying legislation marked a dangerous turn, adding: ‘This is the “End Game” for the NHS.’
Peters continued: ‘You have to connect the dots on what this government is doing with the NHS and the Welfare State. What this government wants is war. War disables people!
‘People are turned literally into cannon fodder and it needs to stop!’
She also called for immediate international action on the situation in Gaza, demanding: ‘Israel must be forced to deliver aid to Palestinians dying in the Israeli-orchestrated famine.’
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