UK Economy Tiptoes Forward—BoE Eases the Brakes with Gradual Rate Cuts

Unknown Apr 02, 2026 600 Views

Britain’s economy is on track for modest growth in 2025, prompting the Bank of England (BoE) to pursue a careful, gradual approach to interest rate cuts, according to the latest forecasts and policy signals. Economists surveyed by Reuters expect UK GDP to grow by 1% this year...

Economists surveyed by Reuters expect UK GDP to grow by 1% this year, with a slight uptick to 1.2% in 2025. The BoE has already reduced its base rate to 4.25% in May—its fourth cut since August 2024—and is expected to cut rates two more times by the end of 2025. This reflects the central bank’s response to easing inflation and persistent global trade tensions, especially those stemming from new US tariffs.

The next BoE interest rate decision is scheduled for June 19, 2025, with Governor Andrew Bailey reiterating that future moves will be “gradual and careful,” driven by incoming economic data. Money markets, however, have scaled back expectations for swift cuts, now anticipating the next reductions as late as September and November.

Despite a strong first quarter, UK growth is expected to slow in the coming months as global trade uncertainties and tariffs weigh on exports and business confidence. The IMF recently upgraded its UK growth forecast for 2025 to 1.2%, citing robust business investment but warning that trade tensions could shave 0.3% off growth this year.

Finance Minister Rachel Reeves is set to unveil a major spending review on June 11, prioritizing health and defense, which could provide further fiscal support.

Key Highlights

UK GDP expected to grow 1% in 2025, with a slight rise to 1.2% in 2026.
Bank of England’s base rate currently at 4.25% after four cuts since August 2024.
Two more rate cuts anticipated by end-2025, but timing may be delayed to later in the year.
Next BoE rate decision:
Inflation eased to 2.6% in March, but a temporary rise to 3.5% is forecast for Q3 due to energy prices.
IMF warns global trade tensions and US tariffs could dampen UK growth by 0.3% in 2025.
Government spending review on June 11 to boost health and defense.

Source: Reuters, Equals Money, Economic Times, Trading Economics

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