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"Despite Liberation Day, the Bank of England may keep its powder dry for another day"

ended 08. April 2025

Though markets are betting on a cut from the Bank of England next month, one economist, Gabriel McKeown, Head of Macroeconomics at Sad Rabbit, has suggested Threadneedle Street may yet err on the side of caution despite the massive uncertainty caused by Liberation Day.

Mckeown believes the Bank of England will once again flag inflationary risks and also “choose to remind markets who’s really in charge by refusing to become reactionary and continuing its decidedly cautious approach to rate cuts as evidenced over the past year”.

Others believe the same. Rob Mansfield, Director at Rootes Wealth Management said: “We have seen violent drops in stock markets but asset prices and the economy are not the same thing. The Bank's mission is to contain inflation. The tariffs are likely to be inflationary and so a rate cut could see inflation flare up. The short-sighted and easy thing to do is cut rates, but being cautious and riding this mess out could be the answer.”

Tony Redondo, Founder at Cosmos Currency Exchange, agrees that “the markets might be getting ahead of themselves. The Bank of England are infamous for always being behind the curve. I fear May will be no exception. The result could then be Threadneedle Street slashing harder later if growth dives”.

Views from FS experts on next month's rate decision below.

13 responses from the Newspage community

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Gabriel McKeown
Political & Economics Writer at Sad Rabbit - Substack Newsletter
In the UK, the case for a May rate cut may seem clear but only if you ignore the deeper tremors under the surface. Inflation is not vanquished, global policy is no longer predictable and the BoE, far from chasing markets, may choose to remind them who’s really in charge by refusing to become reactionary and continuing its decidedly cautious approach to rate cuts as evidenced over the past year. It may also be wise for the BoE to err on the side of caution as we are in an era when global economic policy is written not in spreadsheet models but in furious social media posts. Trump's tariff theatrics have transformed central banking from economic science to psychological warfare. What makes this moment particularly perilous is the lack of clarity on how this escalation will be resolved, with a growing consensus that Washington will show no signs of reversing course, framing these tariffs as essential for restoring economic sovereignty and correcting decades of perceived trade imbalances.
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Scott Gallacher
Director at Rowley Turton
The Bank of England is far more likely to err on the side of caution. Though Trump’s tariffs may be wreaking havoc on markets globally, UK wage growth is still strong so I suspect they’ll sit on the fence in May. A ‘wait and see’ approach feels more likely than a bold cut. Despite Liberation Day, the Bank of England may keep its powder dry for another day.
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Rob Mansfield
Independent Financial Advisor at Rootes Wealth Management
Markets have been hankering for rate cuts for months but is it the right answer? Trump's tariffs have thrown everything up in the air. We have seen violent drops in stock markets but asset prices and the economy are not the same thing. The Bank's mission is to contain inflation. The tariffs are likely to be inflationary and so a rate cut could see inflation flare up. The short-sighted and easy thing to do is cut rates, but being cautious and riding this mess out could be the answer.
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Tony Redondo
Founder at Cosmos Currency Exchange
Markets see an 86% chance of a Bank of England rate cut in May, up from 50%, as Trump’s tariffs tank stocks and stoke 60% recession odds for 2025. UK growth expectations being halved to 0.75% and current gilt yields — the 2-year is at 3.84% — definitely scream out for easing and three cuts are expected this year. However, inflation, forecast at 3.75% by Q3 2025, nearly double the 2% target, could freeze the Bank of England like a rabbit in the headlights. Bailey’s “gradual” stance and March’s 8-1 vote to hold at 4.5% signal caution. Pill’s inflation warnings also linger. The markets might be getting ahead of themselves. The Bank of England are infamous for always being behind the curve. I fear May will be no exception. The result could then be Threadneedle Street slashing harder later if growth dives.
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Bob Singh
Founder at Chess Mortgages
Trump's terrible and terrifying tit-for-tat tariffs have made markets tremble and tumble since Liberation Day causing trade tensions. The effects of the tariffs will cause a shortage in supply of vital goods and lead to inflationary pressures worldwide. The question for the Bank of England Monetary Policy Committee is not whether to cut but by how much? Whilst the market have penciled in a 25bps cut, 50bps could be a smart move to preempt any slowdown in the economy. Any inflationary pressures likely to be caused by rising energy prices is likely to be offset by lower cost of fuel. Lenders are already offering sub-4% pricing as swap rates head south, giving homebuyers a welcome Easter boost.
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David Belle
Founder and Trader at Fink Money
The Bank of England is a curious beast. Yesterday it sold more gilts off even though we are going through utter turmoil in markets. This is because its balance sheet losses are indemnified by the Treasury, namely the UK taxpayer. £750m in gilts were sold off as part of its quantitative tightening. Why? Who knows. It makes no sense. Yet they’re the only central bank to actively do this due to the incentive to. In essence, they are still, therefore, tightening. Amid all the turmoil at present, just think on that for a second.
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Harry Mills
Director at Oku Markets
My view that the Bank of England should cut interest rates has only strengthened from last month, when I said the BoE's Monetary Policy Committee categorically should cut and get on with it. April brought about tax rises and minimum wage increases that may well be inflationary, but with anaemic growth and rapidly rising global recession fears, businesses need to see more accommodative monetary policy from Threadneedle Street. Inflation eased slightly in February after a spike in January; the path lower for inflation was always going to be bumpy, but I bet most would sooner trade lower interest rates for slightly above-target inflation.
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Riz Malik
Independent Financial Adviser at R3 Wealth
Even before Liberation Day, the expectation was for a 25 basis point cut in May and that is still the case. The Monetary Policy Committee, based on their previous comments, will be driven by economic data not by short term market panic unless things materially worsen. Central bankers will proceed with caution as they do not want to be seen to be directly manipulated by economic policy, which could be used to control them and threaten their independence.
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Pete Mugleston
Mortgage Advisor & Managing Director at onlinemortgageadvisor.co.uk
Markets may be right to price in a rate cut next month, especially given the added economic uncertainty triggered by Trump’s tariffs. While the Bank of England has often erred on the side of caution, the impact of a global trade slowdown could tip the balance in favour of cutting sooner rather than later. Inflationary risks remain, but with growth already fragile, the Bank may prefer to act preemptively this time rather than risk being behind the curve again later in the year. A cut next month now looks more likely than not.
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Ben Perks
Managing Director at Orchard Financial Advisers
Trump’s tariffs have caused market turmoil, so a base rate cut in May is a dead cert. With all the noise in the financial sector at the moment a May cut could provide some much needed calm during the storm. Swap rates have been falling, the monetary policy committee should make a .25 cut and provide stability, this will stimulate the market and provide a summer of positive lending.
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Adam Stiles
Managing Director at Helix Financial Partners
A rate cut in May that started as reasonably likely before the Trump Tariff purge now looks extremely likely to happen. The markets have reacted extremely negatively to Liberation Day but there's always the chance the Bank of England will wait and see how things settle down. A cut may well ignore the risk of inflation but it will stimulate the economy and that is key. The rollercoaster continues.
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Rakesh Dua
CEO at DUA Accountancy & Business Consultancy
Businesses and consumers desperately need a rate cut given the uncertainty and lack of growth, let alone the devastation of a trade war. So my view is the Bank of England simply cannot ignore this because a downward spiral caused by a lack of confidence will be much more brutal than inflationary risk. The tide is turning and the Bank of England needs to wake up before it turns into a tsunami where even late rate cuts cannot filter through for months and years to deal with the carnage caused from a challenging set of economic data and forecasts. NI increases coupled with employer confidence being so low will likely mean wage increases will come down as will new vacancies.
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Sean Horton
Managing Director at Respect Mortgages
The mass carnage from Trump's “Liberation Day” announcements continues to rattle the markets, along with UK business and consumer confidence. I would like to see a strong 0.5% drop by the BoE in May, to help restore consumer confidence. No need to delay, we want positive action.