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    Bank of England narrowly votes to cut interest rates to 4% as balancing act continues

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    The nine-member MPC voted by a majority of 5–4 to reduce the key interest rate, the “Bank Rate,” by 25 basis points rather than keeping it on hold.

    Bank of England, the Royal Exchange and the statue of the Duke of Wellington in the City of London on 19th February 2025 in London, United Kingdom.
    Mike Kemp | In Pictures | Getty Images

    The Bank of England voted by a fine margin to cut interest rates from 4.25% to 4% on Thursday as the central bank resumed what it describes as a “gradual and careful” approach to monetary easing.
    The BOE was widely expected to trim rates by 25 basis points at its latest monetary policy meeting, but traders and economists were keen to see the breakdown of support for the decision among the bank’s policymakers.

    As it turned out on Thursday, the nine-member MPC voted by a majority of 5–4 to reduce the key interest rate, the “Bank Rate,” by 25 basis points rather than keeping it on hold. The British pound rose 0.5% against the dollar after the decision, to $1.3424.
    Policy makers have had to weigh up sticky inflation — the consumer price index (CPI) rose to a hotter-than-expected 3.6% in June from 3.4% in May — with a cooling jobs market and lackluster growth. The U.K.’s gross domestic product contracted 0.1% month-on-month in May.
    In a statement Thursday, the bank said the MPC “remains focused on squeezing out any existing or emerging persistent inflationary pressures, to return inflation sustainably to its 2% target in the medium term.”
    The MPC was initially split on reducing or holding interest rates with four members wanting to hold rates, four others voting to cut and one policymaker voting for a larger 50-basis-point cut. The committee then held a second round of voting to arrive at a majority decision to cut rates by 25 basis points.
    Despite the divergent views of policymakers at the BOE, economists expect the downward trajectory for interest rates to continue into next year, but the central bank reiterated its cautious approach, noting that “a gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate.”

    The timing and pace of future reductions in the restrictiveness of policy will depend on the extent to which underlying disinflationary pressures continue to ease, the BOE said.

    BOE Governor Andrew Bailey said in a press conference Thursday that it “remains important that we do not cut bank rate too quickly or by too much” but added that “there are good reasons to think that this rise in headline inflation will not persist.”
    U.K. Chancellor Rachel Reeves said the central bank’s fifth interest rate cut since the last general election in July 2024 was “welcome news, helping bring down the cost of mortgages and loans for families and businesses.”
    George Brown, senior economist at Schroders, said the latest rate cut was no surprise, but said “the path forward is anything but clear.”
    “Jobs, growth and inflation figures all call for different policy prescriptions, as reflected in the unprecedented two rounds of voting needed to reach a majority,” he said in emailed comments Thursday.
    “Given the uncertainty presented by the conflicting data, the committee is right to stick to its ‘gradual and careful’ mantra,” he said, adding: “Nervousness about the labour market might prompt another cut in November. But this will be difficult to justify unless disinflation is clearly underway. As such, we think there is a decent chance rates will not fall below the current rate of 4% this year.”
    Some economists believe the central bank could go further, however.
    “Despite the unexpected rise in CPI inflation in June, we still think the weakness in the labour market means it’s only a matter of time before wage growth and inflation slow to rates consistent with the 2% inflation target,” Ashley Webb, U.K. economist at Capital Economics, said ahead of the decision.
    “We think the Bank of England will cut interest rates from 4.25% now to 3.00% in 2026, which would take rates below the low of 3.50% priced into the financial markets,” he said in a note Wednesday.

    No ‘smoking gun’

    Economists pointed to the labor market as a key factor in policymakers’ decisions, but said there was no “smoking gun” or conclusive evidence of a solid downturn in employment figures.
    “The question looming over this meeting is whether a more worrisome deterioration in the jobs market is imminent,” James Smith and Chris Turner from ING said in a note, adding that “slack is undoubtedly building.”

    A waiter prepares a restaurant terrace ahead of opening in London, UK, on Wednesday, June 18, 2025. U.K. employment plunged by the most in five years and wage growth slowed more than forecast.
    Bloomberg | Bloomberg | Getty Images

    “Payrolled employee numbers have fallen in seven out of the past eight months. The unemployment rate has risen by a few tenths of a percentage point this year … [and] vacancy data from Indeed suggests the U.K. jobs market has cooled further than in other major economies,” they noted.
    But the analysts flagged this is a “slow-moving story,” with much of the weakness in the employment numbers concentrated in the hospitality sector, which was disproportionately affected by recent government tax hikes to the national minimum wage and payroll taxes.
    “In other words, there’s no smoking gun that might prompt a fundamental rethink in the Bank’s outlook just yet. Meanwhile, the inflation data is still proving sticky,” the ING analysts said. More

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    Trump’s ‘reciprocal’ tariffs come into effect, hitting dozens of U.S. trading partners

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    “IT’S MIDNIGHT!!! BILLIONS OF DOLLARS IN TARIFFS ARE NOW FLOWING INTO THE UNITED STATES OF AMERICA!” Trump wrote on social media platform Truth Social.
    Some of the steepest duties include Syria’s 41%, and Laos and Myanmar’s 40% rate, while Switzerland — after being unsuccessful in a last-minute scramble for a deal — is facing 39% tariffs.

    U.S. President Donald Trump’s so-called “reciprocal” tariffs took effect on Thursday, imposing higher duties on many of the country’s trading partners’ exports to the U.S.
    “IT’S MIDNIGHT!!! BILLIONS OF DOLLARS IN TARIFFS ARE NOW FLOWING INTO THE UNITED STATES OF AMERICA!” Trump wrote on social media platform Truth Social.

    In an earlier post Trump had said the tariffs were targeting “COUNTRIES THAT HAVE TAKEN ADVANTAGE OF THE UNITED STATES FOR MANY YEARS.”

    India’s $434 billion merchandise exports engine: What’s at stake as Trump doubles tariffs to 50%

    Trump last week — ahead of his Aug. 1 tariffs deadline — rejigged the tariff rates and pushed back the deadline to Aug. 7.
    Some of the steepest duties include Syria’s 41%, and Laos and Myanmar’s 40% rate, while Switzerland — after being unsuccessful in a last-minute scramble for a deal — is facing 39% tariffs.
    Swiss negotiators this week travelled to Washington D.C. for talks after the country’s higher rate came as a surprise to many, but so far, no deal appears to have been agreed. An update is expected from the Swiss government later on Thursday.

    Switzerland is in a uniquely difficult position when it comes to tariffs. Here’s why

    Separately, Brazil and India are both now facing duties of 50%. While Brazil’s tariffs appear to have kicked in, India’s rate is at 25% for now, and will rise to 50% later this month, according to an executive order signed Wednesday. Trump said his tariffs on India are related to its current purchases of Russian oil.

    Other countries and regions, meanwhile, have been able to strike trade agreements with the U.S. This includes the European Union, Japan and South Korea — which all now face 15% tariffs — as well as the U.K., which negotiated a 10% rate.
    Others, including China and Mexico, remain in limbo. China is engaged in something of a trade truce with the U.S. for now, while previously announced rates for Mexico are on pause.

    ‘This game is not over’

    Trump’s latest tariff announcements — including higher duties on India and threats of 100% tariffs on chips — show “this game is not over,” according to Bill Papadakis, macro strategist at Lombard Odier.
    “There has been some optimism building recently because the overall level of uncertainty has come down,” he told CNBC’s “Europe Early Edition” on Thursday, pointing out that several deals have been made and Trump has walked back some of his threats.
    “But we shouldn’t be overly optimistic either,” he warned, as the impact of tariffs on economic growth and inflation is not yet clear.
    Beat Wittmann, chairman and partner at Zurich-based Porta Advisors, noted that sharp duties like the ones faced by India and Switzerland should not come as a surprise.
    “You just watch how Trump is treating neighbors, Canada, and then you can imagine all the rest. So welcome to this new world,” he told CNBC’s “Squawk Box Europe.”
    Wittmann also weighed in on Switzerland, as it scrambles to lower its tariff rate.
    “What should Switzerland do? Realize that we live in a world of policymakers and these other three superpowers — China, EU and the U.S., and all the rest — are in various degrees, takers,” he said.
    “So the only thing you can do is short-term accommodate, be flexible, be adaptive. But you know, structurally, you have to become stronger yourself and more independent.” More

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    Brazil offers a new way into the Trump ‘taco trade’

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    Trump’s tariff playbook comes with a baseball twist

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    In an interview with CNBC on Tuesday, the president likened billions of dollars’ worth of investment in the U.S. — to the “signing bonus” baseball players typically get when they join new teams.
    The loquacious president frequently uses business and deal-making terminology during speeches and interviews.

    First Lady Melania Trump (C) looks on as U.S. President Donald Trump as he dons his MAGA hat before greeting members of the military and their families during the Military Family Picnic on the South Lawn of the White House in Washington, DC, on July 4, 2025.
    Brendan Smialowski | Afp | Getty Images

    Say what you like about U.S. President Donald Trump’s leadership style and policies, but he has a way with words.
    Trump’s love of deal-making and former career as a real estate magnate are both well-known, with the loquacious president often peppering his speeches and interviews with business-related terminology. Now, he’s turning to the sports world for inspiration when discussing the U.S.’ recent trade deals with global trading partners.

    In a Tuesday interview with CNBC, the president likened billions of dollars’ worth of investments in the U.S. — pledged by Europe and Japan as part of their recent trade deals with Washington — to the “signing bonus” baseball players typically get when they join new teams.
    “We’re taking in trillions of dollars,” Trump told CNBC’s “Squawk Box,” noting “people love the tariffs, they love the trade deals, and they love that foreign countries aren’t ripping us off anymore.”
    “If you look at Japan, we’re taking in $550 billion, and that’s like a signing bonus that a baseball player would get. He would get slightly less than that … But they give a signing bonus of a million dollars, or $2 million or $20 million, or whatever the hell they give today,” he said.
    “So I got a signing bonus from Japan of $550 billion. That’s our money. It’s our money to invest, as we like.” He also noted the European Union’s pledge to both invest in the U.S. and  buy $750 billion worth of American energy.

    The EU and U.S. announced a trade deal in late July with the agreement bringing import tariffs down to 15%. In addition, Washington said the EU “will purchase $750 billion in U.S. energy and make new investments of $600 billion in the United States, all by 2028.”

    No other information was forthcoming on the promised investment, however. When CNBC anchors on Tuesday asked for more clarity, Trump said, “the details are $600 billion to invest in anything I want, anything, I can do anything I want with it.”
    Asked what would happen if the investments did not come through, Trump said, “Well, then they pay tariffs at 35%. No, no. They brought down their tariffs.”
    Speaking anecdotally, the White House leader said that representatives from other nations had asked why the EU had received a lower levy.
    “And I said, ‘Well, because [the EU] gave me $600 billion.’ And that’s a gift — that’s not a loan. There’s nothing to pay back. They gave us $600 billion that we can invest in anything we want.”
    Similarly, the U.S.’ trade deal with Tokyo stated emphatically that “Japan will invest $550 billion directed by the United States to rebuild and expand core American industries.”

    The White House said the funds will be targeted toward “the revitalization of America’s strategic industrial base,” including energy infrastructure and production, semiconductor manufacturing, critical minerals mining, pharmaceutical and medical production and commercial and defense shipbuilding, as the U.S. looks to reduce its reliance on foreign-made goods, materials and suppliers. More