The Bank of England has lowered interest rates for the fourth time in a year, bringing them down from 4.5% to 4.25%. Although bank governor Andrew Bailey attributed the drop to the decline in inflation, he cautioned that recent weeks had demonstrated “how unpredictable the global economy can be” due to the US imposing extensive tariffs.
Concerned that the global trade war may hinder economic development, the Bank contemplated a larger decrease to 4% but ultimately decided that a decline in energy prices would counterbalance this and reduce inflation.
The ruling coincides with the impending announcement of specifics of a tariff agreement between the United States and the United Kingdom. Currently, steel and automobile import duties are higher, while most items imported from the UK to the US are subject to a 10% general tariff.
Speaking at a press conference after the Bank’s ruling, Mr. Bailey stated that an anticipated agreement with the US was “excellent that the UK is leading the way” and that it would “help to reduce uncertainty.”
According to the Bank’s meeting minutes, the rate-setting committee was split, so future rate reductions in the UK will probably be “gradual and careful,” Mr. Bailey stated. Five members supported lowering rates to 4.25%, two supported a more significant fall to 4%, and two supported no change.
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