Bank of England cuts interest rate to 4.25%, signals trade uncertainty risks

It marks the central bank’s fourth rate cut since last August and brings the policy rate to its lowest level since May 2023.

In a statement, the bank said it expects inflation to rise temporarily to 3.7% this year, driven largely by energy prices, before returning to its 2% target.

However, it warned of significant uncertainty stemming from global trade developments.

“Changes in global trade tariffs mean the outlook for inflation is particularly uncertain at the moment,” the BoE said. It added that policy decisions and responses from businesses and consumers would determine how trade changes impact UK inflation.

"On the one hand, increases in global trade tariffs could mean that inflation is lower than expected if it means some countries lower the prices of the goods they sell to the UK. On the other hand, inflation could also be higher than expected, for example, if companies have to change where and how they supply goods, and their costs go up in the process," it said.

UK annual inflation slowed to 2.6% in March, down from 2.8% in February and slightly below expectations.

The rate cut comes as Britain faces new trade challenges. On April 2, US President Donald Trump imposed a 10% tariff on UK exports. Trump is expected to announce a new trade deal later Thursday, and top adviser Peter Navarro told CNN this week that the UK may be first to sign an agreement with Washington.