The Bank of England is set to slash interest rates, with fears growing that ’s aggressive trade tariffs could spark a global economic downturn.
That would hand a lifeline to home buyers, particularly the 1.5 million with tracker rate mortgages, and the estimated 700,000 people who will be remortgaging this year.
Rate-setters are almost certain to cut rates from 4.75% to 4.5% at Thursday’s Monetary Policy Committee (MPC) meeting, with traders now betting on up to FOUR cuts this year.
Predictions over the future path of have been thrown into the air by ‘s threats to impose and then delay tariffs of 25% on Canada and Mexico.
New tariffs of 10% on imports from China to the USA came into effect today, which has provoked retaliation by the Beijing administration.
Predictions over the future path of interest rates have been thrown into the air (Image: Getty)
The President has warned that the could be next in the firing line but hinted Britain might be spared, saying: “I think that one can be worked out.”
Manufacturing figures released this week showed the UK, Germany, and France all struggling—adding to fears of a wider economic slowdown.
Against that background and fears of a recession, City experts believe there is every chance the Bank of England will decide to take a more aggressive line on base rate cuts.
Experts at Bank of America and Goldman Sachs expect to see a cut this week and four this year with the base rate falling to as low as 3.25%.
Analysts at Goldman Sachs said: “We believe that markets are pricing too few rate cuts.
“While it is possible that the Bank of England will slow the pace of cuts if underlying inflation fails to make progress, we believe that a step-up to a sequential pace of cuts in response to weaker demand is actually more likely.”
Ranjiv Mann, senior fixed income portfolio manager at asset manager AllianzGI, told : “We believe that the Bank will cut more aggressively in 2025 than current market pricing, especially if the risks grow of a transatlantic trade war.”
Hetal Mehta, of wealth manager St James’s Place, said the US tariff moves would ‘inevitably raise questions’ about how central banks in the UK and Europe might respond ‘should they also be subject to such protectionist measures’.
“Any further weakness in the euro area economy will likely spillover to the UK,” Mehta said. “For some MPC members, the case for a pre-emptive cut may be enhanced.”