Bank expects lower inflation – but slower economypublished at 12:11 British Summer Time
Faisal Islam
Economics editor
This is an important moment for the UK economy. Rates are now down a full percentage point from their peak, and are likely to go down further over the rest of the year.
Rate cuts are likely to be “gradual and careful”, according to the Bank’s governor Andrew Bailey, but there was a three-way split over a larger cut, or no move at all (see our previous post).
The Bank gave its most through assessment of the impact of President Trump’s tariff wave, saying it would slow the UK economy and lead to lower inflation than expected.
This slower inflation arises from lower oil and gas prices which should be felt by British households, and the likely diversion of cheap goods imports from Asia to Europe including the UK.
The Bank also forecast a significant slowing of the US economy hit by its own tariffs.
UK GDP growth in the first quarter of this year, to be released next week, is now forecast to be a very robust 0.6%, boosted by some trade war-related stockpiling.
The Bank also said the impact of the National Insurance was “fairly small to date”.
With rates falling, trade deals being signed, and more to come with the EU and Gulf, this could be a significant turning point for the UK after years of uncertainty.
