Tonight, the Bank of England may cut interest rates by 25 basis points

The Bank of England will implement its fourth interest rate cut since August of last year. In light of the impact of Trump's tariffs on the global economy, the market will closely watch whether the Bank of England will signal a faster pace of rate cuts.

On May 8, it was reported that at today's monetary policy meeting, the Bank of England is expected to lower the benchmark interest rate by 25 basis points to 4.25%.

Bank of England Governor Andrew Bailey has consistently emphasized the need for a "gradual and cautious" approach to rate cuts. However, Bailey recently highlighted the risks posed by global trade tensions to the economy.

Analysts believe that due to the intensification of global trade tensions caused by Trump's tariff policies, the Bank of England will have to reassess its economic forecasts. Today, the Bank of England will release its latest economic forecasts, from which investors will look for signals regarding the future pace of rate cuts.

The Pace of Rate Cuts by the Bank of England May Accelerate

This will be the fourth rate cut by the Bank of England since August of last year, a pace slower than that of the Federal Reserve and the European Central Bank, due to the Bank of England's concerns about persistent inflationary pressures in the labor market.

Since June of last year, the European Central Bank has cut rates seven times. Wall Street Journal previously mentioned that under the impact of tariffs, the market expects the European Central Bank to continue cutting rates in June and beyond.

The Federal Reserve held steady on Wednesday but noted that uncertainty regarding the economic outlook has increased, with the risks of rising unemployment and inflation both having increased. Since September of last year, the Federal Reserve has cut rates three times, totaling 100 basis points.

Investors currently fully expect the Bank of England to implement three more rate cuts by the end of 2025, which would lower the benchmark rate from the current 4.5% to 3.5%.

Most economists surveyed by Reuters expect the Bank of England to maintain a quarterly rate cut pace, meaning the rate will drop to 3.75% by the end of the year.

Analysts at Bank of America Global Research believe that given UK inflation may be lower than previously expected, the Bank of England may make four rate cuts this year.

BNP Paribas European economist Dani Stoilova predicts that the Bank of England's new forecasts will show inflation returning to the central bank's 2% target by the end of 2026, a year earlier than previously expected by the central bank.

However, Stoilova also added that Bailey and other members of the Monetary Policy Committee may wish to wait and see whether Trump's tariff policies will ultimately push inflation higher by disrupting supply chains