Bank of England expected to launch aggressive rate-cutting cycle amid global trade fears
According to a forecast by Morgan Stanley, the Bank of England is poised to begin a series of sharp interest rate cuts as Donald Trump’s escalating tariff war threatens to dampen global economic growth.
The Wall Street bank expects the central bank to cut rates from 4.5% to 4.25% next week in anticipation of a significant global downturn. It predicts further back-to-back cuts through November, bringing rates down to 3.25%, with an eventual decline to 2.75% in the first half of 2026.
Morgan Stanley warned that rates could be pushed closer to 2% in more severe global slowdown scenarios.
Bruna Skarica, an economist at the bank, said she expects the Bank of England to drop the phrases “gradual and careful” from its policy guidance to allow room for faster rate reductions if necessary. She added that there is a “quite elevated” chance of larger 50 basis-point cuts in June or August, unless trade tensions between the U.S. and its major partners are swiftly resolved.
Barclays has also forecast a rapid series of rate reductions starting next week, predicting cuts at the next four meetings to bring rates from 4.5% to 3.5%.
Money markets appear to agree, having already priced in four rate cuts this year—including moves in August, September, and December.
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