BANK OF ENGLAND INTEREST RATE DECISION: BoE EXPECTED TO CUT RATE AS TRUMP’S TARRIF HINDERS GROWTH

At 3:02 PM GMT +4 Thursday 8th of May 2025, the Bank of England would likely trim interest rates by a quarter point to 4.25%, as it braces for the economic ripple effects of President Donald Trump’s escalating global trade tensions. Analysts also hint of more rate cuts ahead, as the uncertainty unleashed by US President Donald Trump’s global trade war hits growth.

Bank of England Governor, Andrew Bailey during last month’s International Monetary Fund meeting in Washington warned that Trump’s trade policies could trigger “growth shock” for the UK economy. The IMF reduced its 2025 UK’s growth forecast to 1.1% down from 1.6% it had been expecting earlier before the announcement of the tariffs.

Economists say a May rate cut is almost certain, though the MPC may hint a more cautious stance going forward.

Inflation in UK & Impact on BoE Interest Rate Decision

Inflation in the UK witnessed a significant decline in March. As at the last reading on April 16th, 2025, the UK's annual inflation rate for March as measured by the Consumer Prices Index (CPI) decreased to 2.6%, lower than 2.7% forecast and down from 2.8% in February. This decline was primarily driven by reductions in prices for recreation and culture, motor fuels, and certain food items. Meanwhile, the figure is still well above the Bank of England’s 2% target, whereas economists anticipate it climbed above 3% in April, driven by rising energy tariffs. Labour market data indicates that businesses are scaling back hiring plans amid rising taxes and weakened consumer confidence.
According to analysts, Inflation is projected to climb to a new high this summer, driven by rising energy and food prices and might nearly double the Bank’s 2% target. Hence argue that persistently high interest rates and concerns about economic fallout from Trump’s tariffs justify deeper rate cuts to ease borrowing.

POTENTIAL EFFECT OF UK’s RATE CUT ON GBPUSD AND LEVELS TO WATCH AS PER ANALYST

From technical lenses, GBPUSD on the daily TF has been in an upward trend thereby forming peaks and troughs. The pair created thirty-eight months high of 1.3443 on Monday 28th of April 2025, whilst trying to catch its breath, it was supported at 1.3255. Price is currently hovering around 1.3336 and down by 0.25% as at the time of writing after being resisted around 1.3430 during previous trading session.
In view of the upcoming data, from BoJ’s MPC, market is somewhat calm whilst awaiting the catalyst on the radar.
Conventionally, a reduction in bank of England interest rate is expected to weaken a local currency, in this case, the British Pounds and being paired with the USD, the pair would likely tank with potential target around 1.3264 and 1.3048. On the flip side, a bullish momentum could cause a rally with potential target around 1.3430 and 1.3600. Breakout of these levels are not ruled out according to analysts

Fig 1. GBPUSD 1D, tradingview

Fig 2. GBPUSD 2H, tradingview.

ON 2H, the pair is trapped in a range but currently looking bearish as per analysts. Where 1.3430 serves as resistance and 1.3264 acts as support. RSI is currently at 51.4 as at the time of writing, giving room to further downside.
Similar to D1 price action, a break below 1.3264 is expected to usher in 1.3168 and further dip would potentially target 1.3048. a breakout of these levels is not ruled out according to analysts.