Bank of England expected to cut UK interest rates today as trade war threatens economy – business live

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There’s just 20 minutes to wait until we get the Bank of England’s interest rate decision.

Reminder, it’s scheduled for 12.02pm, just after the two-minute silence to mark VE Day.

A quarter-point rate cut is still widely expected, which would bring Bank rate down to 4.25%.

Some City analysts predict an 8-1 split on the monetary policy committee – with eight members voting for a quarter-point cut, and just one votinng for a larger, half-point reduction (to 4%).

Matthew Ryan, head of market strategy at global financial services firm Ebury, says:

“The Bank of England is almost certain to cut rates by another 25 basis points on Thursday as it insures against the downside risks to the UK economy posed by President Trump’s tariffs.

“We think that all nine members of the committee will vote for an immediate cut, with an outside chance that one of the doves opts for a 50bp move.

“The MPC will warn that the tariffs will likely weigh on UK growth this year, and officials may also say that the restrictions have disinflationary implications, which would be a clear bearish signal.

“We do not think that the MPC will commit to a firm path for policy at this week’s meeting, particularly as the outlook for the UK economy remains shrouded in uncertainty.

“While heightened global trade uncertainty is negative for growth, we are still yet to see the full impact on inflation and the labour market from the changes to the National Living Wage and employer NIC in April.

“Yet, the BoE may hint that a faster than “gradual” pace of cuts is warranted in light of global trade tensions, which could open the door to another rate reduction as early as the bank’s following meeting in June.”

Trump announces "full and comprehensive" trade deal with the UK

Donald Trump has declared that today should be “a very big and exciting day” for the US and the UK – a clear sign that some form of trade agreement will be announced at 3pm UK time, or 10am at the White House.

Posting on his Truth Social site, the US president says:

The agreement with the United Kingdom is a full and comprehensive one that will cement the relationship between the United States and the United Kingdom for many years to come.

Because of our long time history and allegiance together, it is a great honor to have the United Kingdom as our FIRST announcement. Many other deals, which are in serious stages of negotiation, to follow!

Our Politics Live blog is tracking the latest developments:

Shipping giant Maersk warns global container volumes could drop due to trade war

Cargo ships at the Lazaro Cardenas Cargo Port, Michoacan State, Mexico. Photograph: Alfredo Estrella/AFP/Getty Images

Shipping group A.P. Moller-Maersk has cut its forecast for demand this year, due to the US trade war.

Maersk warned this morning that trade disruption and geopolitical uncertainty could trigger a drop in global container volumes this year.

Maersk, a barometer of world trade, has revised down its forecast for global container market volume growth to between -1% and 4%. Previously, it had forecast 4% growth this year.

Maersk says:

The outlook for global container demand over the remainder of the year remains highly uncertain, shaped by a rapidly evolving trade policy landscape and increasing recession risks in the US.

Growth is expected to remain positive in the second quarter—particularly if shippers capitalise on the 90-day pause of reciprocal tariffs by frontloading shipments and building inventories. In the latter part of the year, there is, on the one hand, a growing risk that demand could contract, and on the other the possibility that trade rebounds if tariffs are rolled back.

The US dollar has gained ground in the currency markets today, as investors welcome the news that Donald Trump will announce a trade deal (or progress on one, at least) later today.

The greenback has gained against a basket of currencies, nudging the dollar index up by 0.5% today.

The pound has lost its earlier gains, and is now down 0.25% at $1.326.

As well as trade deal optimism, the dollar is also benefitting from last night’s Federal Reserve decision to leave US interest rates on hold yesterday.

Charalampos Pissouros, senior market analyst at XM, says:

The US dollar outperformed all its major peers on Wednesday after the Fed decided to keep interest rates unchanged and sounded less dovish than expected.

The greenback is extending its gains today, especially against the franc and the yen, both considered safe havens, as Trump’s remarks overnight about a potential trade deal further improved risk appetite.

Markets are facing a flurry of major news on interest rates, trade and conflict today, points out Russ Mould, investment director at AJ Bell.

Summing up the situation, he says:

“Investors are watching history unfold before their eyes.

“The Trump administration has already caused turmoil in the business world with the Liberation Day tariff plan. We’re now entering the next phase as countries do deals with the US, and Trump once again changes the rules as he rips up Joe Biden’s playbook.

“At the same time, heightened tensions between India and Pakistan are being watched closely, with investors hoping the situation does not escalate further. All this is happening in a week of important interest rate decisions in the UK and US, meaning investors have a lot of information to digest and that means markets are unlikely to move in a straight line.

“A deal of some kind is expected to be announced today between the UK and the US. It’s hoped that the agreement will lower tariffs imposed on certain UK goods sold into the US, but nothing is certain with Trump until we get the full details.

“A trade deal between the two countries could provide more certainty for UK businesses as to how the future will look, so they can plan accordingly. It might also put the UK in a more favourable light with foreign investors looking to dial down US exposure and wondering where they should reallocate money.”

“Against this backdrop we’ve got the next UK interest rate decision where the Bank of England is widely expected to cut the cost of borrowing. Inflation is expected to go up and consumer and business confidence has been weak of late, creating a backdrop fragile enough for the Bank of England to further ease monetary policy.

One in six UK companies anticipated being hurt by the US trade war, new data shows, highlighting the importance of the deal expected to be announced by Donald Trump later today.

The Office for National Statistics’ latest real-time economic data shows that firms expect weaker demand as they pass on costs to customers.

The ONS says:

In late April, 17% of businesses with 10 or more employees reported that they expect to be impacted by the United States tariffs in the next month; the most reported expected impacts were reduced demand and having to pass on additional costs to customers, both at 7%.

The City are expecting several UK interest rate cuts this year, incuding one just after noon.

The money markets are indicating that Bank rate will be cut by 96 basis points, or almost a whole percentage point, by the end of the year. That means that four quarter-point cuts this year are all-but priced in.

Guillermo Felices, global investment strategist at PGIM Fixed Income, says:

We expect the Bank of England to cut rates by 25 basis points in its May meeting, with any dissenting votes likely to be dovish rather than hawkish. On the domestic front, wage growth and services inflation are running lower than the BoE had projected in February. Add to that the deflationary impact of global trade tensions, lower energy prices, and a stronger Sterling, this meeting seems like the perfect time for the MPC to guide away from their “gradual” approach to cuts.

That being said, April inflation data has the potential to throw a spanner in the works. Increases in water bills, council tax, and other regulated prices, as well as the higher employer NICs contributions, mean there is a good chance UK inflation goes back above 3%.

The market’s focus will therefore be on the messaging. Will the MPC focus on the domestic economy, where the data and news flow could still be interpreted as warranting gradual cuts? Or is the focus on spillovers from global shocks, in which case a gradual approach seems out of place? We think the latter, expecting 3 more cuts after this to end the year at 3.5%.

The front end rates market is almost in line with our view. The market prices in another cut in July and almost two more in H2.

We also have an interest rate decision in Norway.

But as in Sweden, they’ve left rates unchanged at 4.5%, while hinting that borrowing costs will be lowered this year.

Norway’s central bank, Norges Bank, says:

There is uncertainty about future economic developments, but the Committee’s current assessment of the outlook implies that the policy rate will most likely be reduced in the course of 2025.

Sweden’s central bank has left interest rates on hold this morning, despite concerns about the economic outlook.

Sveriges Riksbank has maintained its policy rate at 2.25% today, with policymakers concerned that Donald Trump’s new US trade policy has increased uncertainty in the global economy.

The Riksbank says:

The increased uncertainty abroad implies that the economic outlook appears to be slightly weaker than in the March forecast. The impact on inflation is more difficult to assess.

The Executive Board considers that monetary policy is currently well-balanced and that it is wise to await further information to obtain a clearer picture of the outlook.

Today could be a major one for the UK economy, suggests the BBC’s economics editor Faisal Islam, if we get an interest rate cut and progress on a US trade deal:

Shares have opened a little higher in London.

The FTSE 100 index of blue-chip shares is up 0.2%, or 16 points higher, at 8575 points.

Engineering firms IMI (+3%) – which reaffirmed its full-year guidance this morning – and Weir Group (+2.8%) are the top risers, along with technology-focused investment trust Scottish Mortgage (+2.8%), and packaging firm Mondi (+2.5%).

Among smaller companies, luxury carmaker Aston Martin’s shares have jumped by 6%. Late last month it limited sales to the US due to Donald Trump’s tariffs, so it could be benefitting from hopes of a US-UK trade deal….

British Gas profits hit by warmer weather

Jillian Ambrose

Britain’s warmer than usual start to spring may have helped to brighten the macroeconomic gloom for UK households (and Next!) - but it has come at a cost to British Gas, my colleague Jillian Ambrose reports.

Its parent company, Centrica, told shareholders ahead of its annual general meeting in Manchester today that the warmer weather would hit profits at the UK’s second largest home energy supplier after households were able to switch their home heating off earlier than usual.

The FTSE 100 energy giant assured investors that it still expects the supplier to remain within its £150m to £250m sustainable profit margin for the year. It added that it is also seeing “organic growth” in its business and household customer base.

This will come as welcome news after British Gas was ousted as UK’s largest home energy supplier by Octopus Energy last year, a position it has held since the privatisation of the industry in the 1990s.

Shares in Centrica have fallen by over 5% in early trading in London.

German industrial production rises amid trade tensions

Over in Germany, factory output has risen amid a rush for new goods ahead of Donald Trump’s tariffs.

German industrial production jumped by 3% in March, new data from statistics body Destatis shows.

The increase was driven by the automotive industry (+8.1%), the pharmaceutical industry (+19.6%) and the manufacture of machinery and equipment (+4.4%).

Data earlier this week showed that America’s trade deficit hit a record in March, partly due to a surge of imports of pharmaceutical products and cars.

Carsten Brzeski, Global Head of Macro at ING, says Germany industry is “bottoming out”, after a rough time.

While industrial production is still some 9% below its pre-pandemic level, recent months have shown clear signs of bottoming out. A trend that, despite US tariffs, could continue in the first months of the second quarter, as industrial orders have also improved and inventory levels have started to come down.

However, while these are clear ingredients for a typical cyclical rebound, the imposed tariffs of 10% on European goods as well as higher tariffs on automotives will still weigh on German (and European) industry. By how much will become clear over the next few months. In this regard, the stronger euro exchange rate is like an additional tariff on top of the official tariffs.

And there are more potential impediments to German industry which have nothing to do with tariffs; water levels in Germany’s rivers are currently at almost unprecedentedly low levels for this time of the year. Vessels can currently only transport around 50% of their normal cargo.

Next lifts profit guidance after warm weather boost

UK retailer Next has raised its profit forecast after benefitting from hot weather in recent weeks.

Next has told the City this morning that trading in the last three months (26 January to 26 April 2025) had been “better than expected”.

Full price sales over the quarter have risen by 11.4%, almost twice as fast as the 6.5% it had expected, as shoppers have scrambled to buy new “summer-weight clothing” as temperatures rose.

Next explains:

Our performance in both the UK and overseas was better than we had anticipated.

Sales in our Retail shops have been much stronger than we expected but, in our experience, shops benefit disproportionately from the favourable weather. So we are expecting our Retail sales to return to being broadly flat for the rest of the year.

It has lifted its guidance for pre-tax profits this year by £14m, to £1,080m.

Back in March, Next became the fourth UK retailer to report £1bn of profits for a financial year:

Halifax: house prices rose slightly in April

UK lender Halifax has reported that UK house prices nudged higher last month.

According to Halifax, the average house price increased by 0.3% in April to £297,781, a slowdown on the 0.5% growth recorded in March.

On an annual basis, prices were 3.2%% higher in April than a year ago, up from 2.9% in the year to March.

The bigger picture, though, is that prices have been “remarkable stable” over the last six months, Halifax says, down just £48 over the period.

Amanda Bryden, Head of Mortgages at Halifax, reports that the end of the stamp duty holiday at the start of April did not have a major impact on the market, contrary to other reports.

We know the stamp duty changes prompted a surge in transactions in the early part of this year, as buyers rushed to beat the tax-rise deadline. However, this didn’t lead to a significant increase in property prices, with the last six months characterised by a stability in prices rarely seen since the pandemic.

While the market has cooled slightly since this rush, buyer activity remains strong in comparison to recent years.

“Mortgage rates have continued to fall, with most lenders now offering rates below 4%. Coupled with positive earnings growth that has outpaced broader inflation, these factors have helped to steadily improve affordability for many buyers.

“Overall, the market continues to show resilience despite a subdued economic environment and risks from geopolitical developments. There is likely to be a bump-up in consumer price inflation as household bills increase, but with further base rate cuts also expected, we anticipate a similar trend of modest price growth this year.”

However, last week rival lender Nationwide reported that UK house prices dropped by 0.6% on average in April, which it attributed to the rush in March to beat changes to stamp duty….

Donald Trump’s “major trade deal” announcement later today (3pm UK time) will be closely watched, for at least two reasons.

As well as the identity of the country involved, investors will want to know what the framework of the deal looks like – as a sign for how other negotiations may play out.

Jim Reid, market strategist at Deutsche Bank, explains:

In a Trump 2.0 world it often seems like the news flow doesn’t really get going until after the US market closes and today is another example of that as overnight Mr Trump has teased that a “major trade deal” will be announced today at 10am DC time (15:00 BST). This must be the very big announcement he flagged on Tuesday.

The media are all lining up behind the deal being with the UK. Given that full trade deals take years to negotiate, this will likely be a framework and it will be interesting to see whether the 10% baseline tariff stays as that will provide an important template for negotiations with other countries and a good guide to the long-term tariff strategy of the US.

Pound rises on reports Donald Trump could announce trade deal with UK today

Hopes that the US and UK have agreed the framework of a trade agreement have given the pound a small lift, and could push shares higher in London today too.

Sterling jumped as much as half a cent in early trading, to as high as $1.3356, before slipping back to around $1.332.

The move follows reports that Donald Trump is planning to announce a new trade pact with the UK later today.

Trump has caused a stir, by posting on his Truth Social site that a major trade deal would be announced today, saying:

“Big news conference tomorrow morning at 10:00am, the Oval Office, concerning a MAJOR TRADE DEAL WITH REPRESENTATIVES OF A BIG, AND HIGHLY RESPECTED, COUNTRY. THE FIRST OF MANY!!!”

Britain’s FTSE 100 share index is also expected to rise when trading begins at 8am, as traders anticipate that the UK could be the “big and highly respected” country involved.

A team of senior British trade negotiators landed in Washington on Wednesday as talks over a deal between the two countries gathered pace.

Officials from the UK business and trade department were attempting to get an agreement signed before a planned UK-EU summit on 19 May.

More here:

Introduction: Bank of England expected to cut interest rates today

Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.

The Bank of England is in the spotlight today, as policymakers at the UK central bank set interest rates in the face of a global trade war, and a weak domestic economy.

To be honest, there’s not much suspense in the City this time. The BoE is widely expected to cut interest rates for the fourth time in the current cycle, at lunchtime.

Bank Rate is currently 4.5%, and many traders suspect the only question is whether the monetary policy committee restricts itself to a quarter-point cut, to 4.25%, or gets the big bazooka out and votes for a half-point cut, to 4%.

This morning, a quarter-point cut is much the more likely – it’s priced at a 95% chance in the money markets. A half-point cut would be a surprise, as it’s seen as just a 5% possibility.

James Mashiter, fixed income portfolio manager at asset manager SEI, says:

“We think the Bank of England will cut the base rate by 25 basis points, in line with market expectations.

However, with a whiff of stagflation in the air, the BoE is in a difficult position as it attempts to stimulate growth while keeping inflation expectations anchored and the bond vigilantes at bay.”

The Bank will be concerned that Donald Trump’s trade war will hurt the global economy, with a knock-on impact on UK growth (governor Andrew Bailey often mentions how Britain is an open economy).

But they’ll also have to assess the impact on inflation – if manufacturers from China, say, redirect products initially destined for the US into the UK market, at bargain prices.

Last month, the Bank warned that Donald Trump’s sweeping tariffs have put global growth at risk.

Ranjiv Mann, senior portfolio manager at Allianz Global Investors, predicts a quarter-point cut, given the downside risks for the global growth outlook, and told clients:

• UK economic activity remains weak and trade policy uncertainty has risen sharply in recent months, weighing on UK consumer and business sentiment.

• The Bank has been taking a cautious policy approach since it last cut rates in February given that CPI inflation remains above its target. However, business sentiment is now beginning to be weighed down by trade policy uncertainty, placing renewed downside risks for the UK economic outlook.

• Short term interest rate markets are pricing at least a further three rate cuts in 2025; if the risks of a global trade war intensifies over the coming months, markets may well bring forward UK rate cut expectations.

Last night, the US Federal Reserve left interest rates on hold, and warned that Donald Trump’s tariffs were likely to raise prices, weaken growth and increase unemployment if maintained.

One housekeeping note – today’s decision, and the Bank’s latest economic forecasts, will be delayed by two minutes to honour the silence to mark the 80th anniversary of VE Day. So it’ll be announced at 12.02pm, rather than noon

The agenda

• 7am BST: Halifax UK house price index for April

• 12.02pm BST: Bank of England interest rate decision

• 12.30pm BST: Bank of England press conference

• 1.30pm BST: US weekly jobless data