The Bank of England is widely expected to cut its key interest rate by a quarter point as US President Donald Trump's planned tariffs threaten to weaken economic growth
The Bank of England is widely expected to cut its key interest rate by a quarter point as US President Donald Trump's planned tariffs threaten to weaken economic growth AFP

The Bank of England is widely expected to cut its key interest rate by a quarter point Thursday as US President Donald Trump's planned tariffs threaten to weaken economic growth.

It follows the Federal Reserve's decision Wednesday to freeze US borrowing costs and last month's move by the European Central Bank to cut eurozone interest rates.

The Bank of England is set to trim its rate to 4.25 percent in a decision due at 11:02 GMT, two minutes later than usual as the nation stands silent to mark the 80th anniversary of Victory in Europe Day.

With the rate cut priced in by markets, investors will be looking for any shift in language by the BoE's Monetary Policy Committee that could hint at further reductions this year.

"While the Bank of England is universally expected to cut (on Thursday)... the key to the reaction in the pound will be the bank's accompanying communications," noted Enrique Diaz-Alvarez, chief economist at global financial services firm Ebury.

He added that the bank was likely "to revise lower both of its inflation and growth projections for 2025, with the committee likely to say that US tariffs will weigh on UK growth and dampen price pressures".

With global trade tensions recently sending oil prices sharply lower, inflation is on course to retreat according to analysts.

Britain is facing 10-percent tariffs on most of its goods exported to the United States, its second-largest trading partner after the European Union.

Bank of England governor Andrew Bailey has insisted that Trump's trade assault could hurt Britain's economy even if the country avoided the heaviest tariffs.

London is in the midst of negotiations with Washington over a post-Brexit trade deal that could see levies reduced in return for relief over Britain's digital services tax paid by US tech giants, according to media reports.

At its last rate-setting meeting in March, the Bank of England kept its main interest rate on hold at 4.5 percent.

Prior to that it reduced borrowing costs three times in seven months with the UK economy already pressured by weak growth.