The prospect of a global trade war sparked by US tariff hikes is a “very serious” risk to UK growth, said the Bank of England governor.  

“It’s not just the relationship between the US and the UK, it’s the relationship between the US, the UK and the rest of the world that matters so because the UK is such an open economy,” said Andrew Bailey at an Institute of International Finance event in Washington last night. 

“We have to take very seriously the risk to growth. I’ve said a number of times, that fragmenting the world economy will be bad for growth.”   

“We’re currently working through that because we’ve got an interest rate decision coming in two weeks’ time.” 

UK money markets expect a quarter-point cut, from 4.5%, at next month’s meeting of the bank’s Monetary Policy Committee, on 8 May, and another two or three by the end of the year. 

Bailey’s comments come after the International Monetary Fund this week slashed its global growth forecast by 0.5% to 1.4% this year, with nearly all countries seeing a downgrade.

It said the UK economy is predicted to grow by 1.1% this year, 0.5% points less than January’s forecast. 

Earlier this month, the US imposed baseline tariffs of 10% on more than 75 nations, including the UK. While America has hit China with 145% of import charges and Beijing has put in place a 125% tariff on US goods. 

However, UK mortgage lenders are already easing rates in advance of an expected lower base rate. 

Hargreaves Lansdown head of personal finance Sarah Coles said: “Mortgage rates below 4% are spreading, as the market is pricing in a first cut in May, and then more cuts as we go through 2025.  

“The average two-year fix is now 5.22%, down from 5.32% at the start of the month. “It’s impossible to predict the future with complete accuracy, because another seismic shift from the US could force a reappraisal of the likely impact on the world economy, and therefore the likely path of rates.  

“However, all other things being equal, we can expect mortgage rates to continue to move gradually lower. 

“Unfortunately, for those remortgaging from back when rates were much lower, there’s still some pain to come.  

“The HL Savings & Resilience Barometer shows that those who have remortgaged since the end of 2022, spend an average of £157 more a month on their mortgage payments than those who haven’t refinanced yet.  

So, while a drop in rates is welcome, borrowers aren’t out of the woods just yet.”