Market anticipates Bank of England rate cut due to Trump's tariffs, leading to economic uncertainty
From Morningstar: 2025-04-07 07:50:00
Financial markets are anticipating a Bank of England rate cut in May due to Trump’s tariffs increasing the risk of a global recession. Economists are divided on whether inflationary policies or recessionary tariffs should determine interest rates. The UK faces stagflation concerns amidst low GDP and impending inflation.
The Bank of England must balance combating inflation with stimulating economic growth in its upcoming decision. Market data indicates a high likelihood of a rate cut, with expectations shifting rapidly. Trump’s tariff impact has intensified economic uncertainty, prompting speculation of more aggressive rate cuts by the Bank.
Uncertainty surrounds the Bank of England’s future rate decisions after unexpected inflation and subsequent rate cuts in 2024. Market expectations for 2025 varied, leading to mixed forecasts. Geopolitical events, including Trump’s tariffs, have accelerated market volatility, impacting global markets and UK stocks.
UK stocks may respond positively to a Bank of England rate cut amid recent negative market sentiment. Interest rate swaps data indicates a consensus on a rate cut, potentially influencing market reactions. However, market movements are also influenced by external factors, such as geopolitical events and global economic conditions.
Yields on UK government bonds have fallen as markets brace for potential recession and central bank rate cuts. Short-term gilt yields have decreased significantly, signaling market expectations. Long-term gilt yields have seen more modest declines, reflecting uncertainty and market volatility in response to geopolitical events and trade tensions.
Read more at Morningstar: Will the Bank of England Cut Interest Rates After…