BoE’s Bailey: Rate cuts ‘gradual, careful’ amid trade uncertainty

Bank of England Governor Andrew Bailey told lawmakers on Tuesday that interest rate cuts in the UK will remain “gradual and careful” as global trade policy turbulence, particularly from the US, adds fresh uncertainty to the economic outlook.

Speaking before Parliament’s Treasury Committee, Bailey said the outlook for rates remains downward but warned the pace and scale of easing are now “shrouded in a lot more uncertainty”.

The BoE cut rates to 4.25 per cent in May, citing market volatility driven by US President Donald Trump’s shifting trade policies.

Bailey added that recent inflation data and a loosening labour market — particularly slowing wage growth — support the case for further rate cuts, though he declined to signal how he might vote at the upcoming June MPC meeting.

Deputy Governor Sarah Breeden, who also backed May’s rate cut, told MPs she would have supported the move even without trade-related risks. “You should think of the majority as having a broad church within it,” she said of the split MPC vote.

Despite strong GDP growth in the first quarter, Bailey cautioned that the BoE still expects UK output to rise just 1 per cent in 2025, picking up modestly to 1.5 per cent by 2027. He noted a “disjoint” between optimistic official figures and more downbeat business surveys, which he said were often better predictors of future performance.

Attribution: Reuters
Subediting: M. S. Salama