The Bank of England is likely to cut interest rates to 4.25% tomorrow but will keep its options open on the pace of future cuts, as uncertainty swirls about the global trade backdrop and geopolitical tensions.
Policymakers on Threadneedle Street are overwhelmingly expected by financial markets to cut the Bank Rate at the 8 May meeting amidst a highly uncertain economic backdrop, said economists at Peel Hunt.
"Although UK economic momentum has picked up appreciably since last December, and has surprised to the upside relative to depressed BoE expectations, rising global growth worries linked to the US’s erratic and risky tariff policies pose fresh risks.
"Following two once-in-a-century shocks - a global pandemic and a land war in Europe – during the past five years, setting policy amid sky-high uncertainty has unfortunately become par for the course for the nine-member Monetary Policy Committee," they said.
A policy decision from the MPC will arrive at 12:02 GMT on Thursday, slightly later than normal due to a two-minute silence at midday to commemorate the 80th anniversary of VE Day.
Alongside the decision, the May Monetary Policy Report and MPC meeting minutes will be published, and Governor Andrew Bailey will host a press conference to explain the rationale behind the decision.
The BoE will also upgrade its GDP growth projection in 2025 and downgrade inflation forecasts, the economists added, expecting the report to warn about downside risks to growth and inflation over the medium term.
Peel Hunt expects the MPC to "remain circumspect with its forward guidance – consistent with a pace of future cuts at one per quarter".
"But risks are skewed towards policymakers opening the door for a another cut a soon as June."
Journalists are predicted to press Governor Bailey on whether policymakers have shifted in their assessment of growth risks by enough to consider cutting at consecutive instead of intermittent meetings.