The decision by the Bank of England to cut the base rate by 0.25% to 4.25%, highlights a three-way divide among policymakers caused by shifting global trade.  

The Bank’s rate-setting Monetary Policy Committee voted in a 5-2-2 split to cut rates, with Swati Dhingra and Alan Taylor pressing for a larger 0.5%, while Catherine L Mann and Huw Pill were happy with the status quo. 

The UK and the US are due to announce what is expected to be a limited trade deal later today, with car tariffs and digital taxes expected to feature. 

But the May Monetary Policy report was clear about the unsettling effect on world trade caused by US President Trump’s April tariffs, which placed import taxes of at least 10% on some 75 countries. 

It said: “Uncertainty surrounding global trade policies has intensified since the imposition of tariffs by the United States and the measures taken in response by some of its trading partners.  

“Prospects for global growth have weakened as a result of this uncertainty and new tariff announcements, although the negative impacts on UK growth and inflation are likely to be smaller.” 

However, the Bank lifted UK its forecast for the UK economy to grow by 1% this year, marking an upgrade from the 0.75% growth predicted in its February report. 

This is largely due to growth over the first three months of 2025 being higher than anticipated. 

But the forecast for 2026 has been downgraded to 1.25% growth, from 1.5% previously. 

The committee expects that energy prices “are still likely” to drive up inflation to 3.5% in the third quarter of the year before “falling back thereafter”.   

But rate-setters left few clues about their direction of travel this year. 

The report said: “Monetary policy is not on a pre-set path. The Committee will remain sensitive to heightened unpredictability in the economic environment and will continue to update its assessment of risks.”  

Together chief commercial officer Ryan Etchells says: “The fallout from US President Donald Trump’s policy on tariffs has caused a huge amount of instability, leading to economists predicting a slowing global economy.” 

SPF Private Clients chief executive Mark Harris points out: “The Bank missed an opportunity to be bold and cut by a half point to 4%. This would have sent out a strong message, helping boost the housing market and wider economy, particularly as the stamp duty concession has now ended. 

“Swap rates continue on a downward path with lenders reducing mortgage rates in recent weeks and a plethora of sub-4%  deals now available. This latest rate reduction was largely expected by the markets and has been factored into pricing already.  

“However, a continual decline in Swaps would enable lenders to price more keenly in future, easing borrowers’ affordability concerns further.” 

Rightmove mortgage expert Matt Smith says: “The much-anticipated second rate cut of the year has arrived, and with some lenders having taken their time to pass on the benefits of the expected Bank rate cut, I think we may now see further reductions in the coming days and weeks.  

“A fresh round of mortgage rate reductions could be a boost for buyer demand as this year’s Spring selling season approaches its end.” 

MPC Vote: 

Five members — Andrew Bailey, Sarah Breeden, Megan Greene, Clare Lombardelli and Dave Ramsden) voted for a 0.25% cut 

Two members — Swati Dhingra and Alan Taylor voted for a 0.5% cut

Two members — Catherine L Mann and Huw Pill voted to leave the rate unchanged