The Bank of England may cut interest rates when its Monetary Policy Committee (MPC) meets on Thursday, as policymakers face renewed concerns over global trade tensions and the need to stimulate domestic growth.
With rates sat at 4.5% falling UK inflation and the prospect of escalating US tariffs are shifting expectations.
March’s consumer price index surprised to the downside, strengthening the case for a rate cut. Meanwhile, the possibility of a slowdown in global trade is adding to concerns about the UK’s economic outlook.
Economists suggest that while inflation remains above the Bank’s 2% target, slowing momentum in wage growth and core prices could give the MPC room to act.
GEOPOLITICAL RISKS
A cut would mark the first step in a potential easing cycle, as central banks around the world weigh similar moves in response to weakening demand and geopolitical risks.
Matt Thompson, head of sales at estate agency Chestertons, says: “UK inflation fell more than expected in March but there are concerns that US tariffs could lead to a breakdown in global trade and weigh heavily on the UK’s growth prospects.
“ To combat this and boost consumer confidence, we expect the Bank of England to cut interest rates to 4.25% on 8th May. This would have an imminent impact on buyer activity as more house hunters will feel motivated to start or finalise their search.
“Particularly first-time buyers who, since April, are subject to higher stamp duty charges again, would welcome lower interest rates and see it as a window of opportunity to re-enter the market.”
HOUSING MARKET
Any decision to cut rates could have immediate implications for the housing market, where affordability pressures have been mounting.
Mortgage approvals rose in February for the fifth consecutive month, but higher borrowing costs have kept many would-be buyers on the sidelines.
Should the Bank opt for a cut this week, it would signal a clear shift in policy direction – aimed at supporting confidence in the face of growing external headwinds.
