According to recent figures from LSEG, a quarter-point interest rate cut by the Bank of England now appears almost certain. This follows comments on inflation made by a member of the Bank’s Monetary Policy Committee, which have influenced market expectations significantly.
Financial markets are currently pricing in a 100% chance that the Bank will lower interest rates next month. This comes as the global economy continues to feel the ripple effects of Donald Trump’s shifting trade policies, which have increased uncertainty and put pressure on central banks to respond.
Earlier data released on Tuesday by LSEG had already indicated an 82% probability that the Bank of England would reduce the base rate from 4.5% to 4.25% on 8 May. Since then, confidence in this outcome has only grown, with traders and analysts now fully expecting a cut.
Any lingering uncertainty over the likelihood of an interest rate cut quickly faded after fresh comments on inflation from a member of the Bank of England’s rate-setting committee.
Megan Greene, who had previously voted in favour of holding rates steady during the March meeting, shared her views in an interview with Bloomberg. She suggested that the new US trade tariffs, introduced under Donald Trump, are more likely to reduce inflation in the UK rather than drive prices higher.
Her reasoning is that, since the UK has chosen not to retaliate with its own tariffs, it may become an attractive destination for lower-cost goods from Asia and Europe. This increase in supply could help lower prices, rather than add to inflationary pressures.
Greene explained, “The tariffs represent more of a disinflationary risk than an inflationary risk.” She also acknowledged the complexity of the situation, noting, “There’s a ton of uncertainty around this, but there are both inflationary and disinflationary forces at play.”
Megan Greene also commented on the recent surge in the value of the pound against the US dollar, suggesting that it could help ease inflationary pressures in the UK. A stronger pound typically reduces the cost of imported goods and services, which can lessen the burden on consumers and businesses alike. This, in turn, may contribute to a slower pace of price increases across the economy.
However, Greene cautioned that while the currency movement is promising, it is still early days and too soon to draw firm conclusions about the long-term trajectory of the exchange rate. The pound’s value is influenced by a range of factors, including global economic developments, market sentiment, and future interest rate decisions by both the Bank of England and the US Federal Reserve.
Despite the recent dip in inflation seen in March, the Bank of England still anticipates that inflation will rise again later in the year. The unexpected drop last month was largely driven by a fall in energy prices, which provided temporary relief to households and businesses. However, this is not expected to last.
From April, businesses are facing higher costs due to changes in taxation. These tax rises are likely to feed into prices, adding to the upward pressure on inflation. In addition, global economic uncertainty and geopolitical risks continue to pose challenges that could affect both supply chains and market stability.
The Bank’s inflation outlook reflects the delicate balance it must strike between supporting economic growth and keeping inflation under control. As a result, policymakers will be closely monitoring a variety of factors—including e
Megan Greene also commented on the recent surge in the value of the pound against the US dollar, suggesting that it could help ease inflationary pressures in the UK. A stronger pound typically reduces the cost of imported goods and services, which can lessen the burden on consumers and businesses alike. This, in turn, may contribute to a slower pace of price increases across the economy.
However, Greene cautioned that while the currency movement is promising, it is still early days and too soon to draw firm conclusions about the long-term trajectory of the exchange rate. The pound’s value is influenced by a range of factors, including global economic developments, market sentiment, and future interest rate decisions by both the Bank of England and the US Federal Reserve.
Despite the recent dip in inflation seen in March, the Bank of England still anticipates that inflation will rise again later in the year. The unexpected drop last month was largely driven by a fall in energy prices, which provided temporary relief to households and businesses. However, this is not expected to last.
From April, businesses are facing higher costs due to changes in taxation. These tax rises are likely to feed into prices, adding to the upward pressure on inflation. In addition, global economic uncertainty and geopolitical risks continue to pose challenges that could affect both supply chains and market stability.
The Bank’s inflation outlook reflects the delicate balance it must strike between supporting economic growth and keeping inflation under control. As a result, policymakers will be closely monitoring a variety of factors—including energy prices, exchange rates, and fiscal measures—before making further decisions on interest rates.
Tensions have risen following criticism from President Donald Trump, who has expressed frustration with the US Federal Reserve’s response to a forecasted economic slowdown. The slowdown is believed to stem largely from the impact of newly imposed trade tariffs.
President Trump voiced his displeasure publicly last week, stating on social media that Federal Reserve Chair Jay Powell should be removed from his position. He also called for an immediate interest rate cut, using the demandingly worded phrase “NOW” in his post.
Meanwhile, the UK’s Chancellor, Rachel Reeves, is currently in Washington for a series of high-level meetings. While her official agenda has not been fully disclosed, it is expected she will engage in discussions with her American counterpart aimed at securing a trade agreement. Such an agreement could help avoid the imposition of tariffs between the US and the UK.
Should the Bank of England move ahead with a rate cut, it would likely be welcomed by Chancellor Reeves. A reduction in interest rates could provide a much-needed lift to her efforts to stimulate economic growth, particularly at a time when the global trade landscape remains uncertain and fragile.
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