From Morningstar: 2025-05-08 09:00:00

Morgan Asset Management.

The Bank of England cut the UK’s official interest rate to 4.25% amid fears of a global recession. Tariffs imposed by the US government played a key role in the decision. The Bank expects inflation to rise due to higher energy prices, but uncertainties remain due to the trade war and supply chain disruptions.

As the US-UK trade deal looms, Governor Bailey welcomed the agreement, which could remove some uncertainty for the UK. UK goods exports to the US are affected by tariffs, with the Bank expecting a smaller impact on UK growth and inflation compared to the global economy.

Market uncertainty from tariffs has led to a shift in UK monetary policy, with more rate cuts expected in 2025. Traders anticipate three more rate cuts this year. Some experts believe the Bank may accelerate easing if economic headwinds intensify, while others caution against an aggressive pace of rate cuts.

The Bank of England has not disclosed its next move following the recent rate cut. The next monetary policy decision is expected in June, as uncertainty in the economic environment remains high. Mortgage rates in the UK have already started to decline in anticipation of the news, with lenders introducing attractive offers. Tracker mortgages will be affected by the rate cut, with fixed rates following SONIA. The average two-year fixed mortgage rate has dropped to its lowest level since September 2022. Borrowers seeking to refinance will benefit from the downward trend in mortgage rates, according to finance expert Rachel Springall. Lenders will need to navigate the balance between new business and rate margins in the coming months.



Read more at Morningstar: Bank of England Cuts Interest Rates Again Amid…