Bank of England Cuts Rates to 4.25%—Desperate Move as Tariffs Strangle Growth

Another rate cut from the Old Lady of Threadneedle Street—because clearly, printing money solves everything. The BoE slashes rates to 4.25%, its third cut this year, as global trade wars hammer the UK economy.

Markets yawned. Sterling dipped. Traders placed bets on how low rates can go before we’re paying banks to hold our cash.

Meanwhile, Bitcoin quietly ticks upward—because when central banks panic, decentralized assets start looking real smart.

Tariffs trigger global shock, forcing BoE to act

The Bank of England cut came after President Donald TRUMP announced sweeping new import tariffs from major trade partners, including many of the country’s allies like the UK and the EU. The move spurred a sell-off in global markets and revived trade war fears.

The Bank warned that the new tariffs would contract the UK economy. While the immediate effect on British exports is expected to be modest, officials are more concerned about the broader disruption to global trade that could weigh heavily on growth.

Two-thirds of the projected growth drag comes from the global shock, not direct UK-US trade. The IMF has already cut its estimate for global growth. The BoE piled in behind it, slashing its 2026 UK growth forecast from 1.5% to 1.25%.

In the short term, it sees GDP growing 1% this year, a tad above its previous forecast, but warns that recent growth seems “erratic.”

BoE signals cooling inflation but warns of lingering risks

The rate cut also signals that inflationary pressures may be easing. The Bank of England now expects inflation to peak at 3.5% this year, slightly below earlier forecasts, and projects that its 2% target could be reached by spring 2027, nine months ahead of schedule.

This change of perspective indicates declining energy prices and slowing pay growth. Wage growth, now in the vicinity of 6%, should slow to 3.75% by year-end.

However, risks to the economy persist. The Bank has also designed two new alternative economic scenarios.

In the first, prolonged policy uncertainty prompts consumers and businesses to hold back on spending and investment, further weakening growth. In the second, stagnant labor productivity combined with persistent wages could trigger a wage-price spiral, pushing inflation higher and making additional rate cuts far more precarious.

The markets cheered the move, but only so much. Before the decision, markets priced in a cut of almost 3.5% by year-end. That is lower than an earlier range of 3.75% to 4%, given before the full outline of the US tariff plans was released.

The British pound ROSE modestly against the dollar, and yields on British government bonds dipped as investors started to anticipate deeper cuts.

Still, the Bank of England made its stance clear: there is no predetermined path for interest rates. Future moves will be made “gradually and cautiously,” guided by how inflation evolves and global risks unfold.

KEY Difference Wire: the secret tool crypto projects use to get guaranteed media coverage