The Bank of England has lowered interest rates for the fourth time in a year, bringing them down from 4.5% to 4.25%.
Although bank governor Andrew Bailey attributed the drop to the decline in inflation, he cautioned that recent weeks had demonstrated “how unpredictable the global economy can be” due to the US imposing extensive tariffs.
Due to worries that the global trade war would hinder economic development, the Bank contemplated a larger decrease to 4%, but ultimately decided that this would be counterbalanced by a decline in energy prices and ultimately lower inflation.
The ruling coincides with the impending announcement of specifics of a tariff agreement between the United States and the United Kingdom.
Currently, most goods imported from the UK to the US face a blanket 10% tariff, with higher import taxes on steel and cars.
Speaking at a news conference following the Bank’s decision, Mr Bailey said it was “excellent that the UK is leading the way” with an expected deal with the US, which would “help to reduce uncertainty”.
Of the nine members on the Bank’s rate-setting committee, five members voted to cut rates to 4.25%, two voted in favour of a larger reduction to 4% and two voted for no change.
The Bank gave its most through assessment of the impact of President Trump’s tariff wave, saying that it would slow the UK economy and lead to lower inflation than expected.