Outside chance of votes for 50bp rate cut and follow up 25bp rate cute in June – BoE

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.