Will Bank cut interest rates? Hope for borrowers – but experts predict UK is heading for recession

Interest Rate Cut Anticipation Offers Borrowers Hope Amidst Recession Concerns

In a move offering a glimmer of optimism for borrowers, investors are speculating that the Bank of England may accelerate interest rate cuts to bolster the flagging economy. This comes as Barclays economists cautioned that a potential trade war could deduct 1.5 percentage points from UK economic growth this year, possibly triggering a recession.

Economic Growth Forecast Dims

The National Institute of Economic and Social Research further projects that tariffs could reduce UK growth to near zero in the coming year. Investors are increasingly pricing in at least two more interest rate reductions as almost certain, with a third cut now viewed as a distinct possibility.

Interest Rate Reductions on the Horizon

The initial rate cut is widely expected next month, with predictions pointing towards a decrease from 4.5 percent to 4.25 percent. Thomas Pugh, an economist at RSM UK, warned of another year of economic stagnation for Britain, at best.

Further Monetary Easing Expected

“We anticipate three additional rate cuts in 2025,” Pugh added, suggesting a continued easing of monetary policy.

Global Economic Pressures

George Brown, an economist at Schroders, noted the challenges faced by the US Federal Reserve, which is currently grappling with sluggish growth coupled with elevated inflation.

Central Banks Eye Rate Cuts to Mitigate Risks

“However, broadly speaking, we expect the Bank of England and the ECB to mitigate economic risks by implementing further reductions in interest rates,” Brown stated, indicating a likely trend of central banks using rate cuts as a preventative measure against economic downturns.

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