Bank of England predicts interest rates will be lowered due to rising unemployment and Trump tariffs

Bank of England policymakers are widely expected to lower interest rates this week to prevent unemployment from rising and have taken a hit to global trade from new import tariffs by Donald Trump.

City traders dare say the bank’s nine-member Monetary Policy Committee (MPC) will reduce its title rate to 4% by 0.25 percentage points on Thursday, the fifth cut since August last year and restore interest rates to its position in March 2023.

Financial markets reduced their chances by more than 80% at their August meetings and a quarter of the decline before the end of the year.

Prime Minister, Rachel Reeveswill welcome the move, which will lower mortgage rates and cut borrowing costs for cash-strapped businesses.

However, the decision is likely to illustrate the difficult situation facing the UK as the government strives to promote growth while trying to limit Whitehall spending before the fall budget.

economy Shrink 0.1% in May and 0.3% in AprilMany economists blamed it on the uncertainty and additional business taxes created by Trump in October’s budget, which went into effect in April.

Among signs of weaker growth next year, the number of vacancies was below its pre-pandemic level, with unemployment rising to 4.7% in the three months ending May, the highest since June 2021.

Trump signed Trade agreement with the UK Limit tariffs on most commodities to 10%, but on Friday, the U.S. president announced additional import tariffs for trading partners Up to 50%harm global growth.

The International Monetary Fund recently said the UK economy will strive to expand by more than 0.1% in the third and fourth quarters of the year before quarterly growth slightly increased to 0.3% next year.

MPC will release new forecasts on Thursday, which could prove even more frustrating, suggesting an upcoming period of scattering, which is due to slower growth next year, while inflation remains high.

Consumer Price Index (CPI) has increased 3.6% of the year ended JuneAccording to the latest official figures, it is well above the MPC’s 2% target.

Matt Swannell, chief economic adviser for EY Project Club, said the increase in vacancies and higher unemployment showed that the labor market was weakening, while wages were growing faster than the Bank of England’s May forecast.

But he predicted that there were differences in the MPC vote after food inflation rose in June.

“The lingering signs of price pressure will mean that the committee remains cautious, with two Hawks MPC members not expected to support any changes,” he said.

Inflation rose three months ago Bank of England expectations after the cost of certain basic items, such as meat and butter.

“The rise in food prices is particularly important to the MPC because it stems from household inflation expectations, which is the committee’s key meter around the risk of sustained inflation,” Swannell added.