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Home Business NewsThe Bank of England has cut interest rates over fears of Trump’s tariffs war

The Bank of England has cut interest rates over fears of Trump’s tariffs war

8th May 25 12:11 pm

The Bank of England has cut interest rates from 4.5% to 4.25% over fears of the US President Donald Trump’s sweeping tariffs which is affecting the global economy.

Mike Randall, CEO of Simply Asset Finance, said, “This month’s rate cut will ease some pressure for businesses under strain, especially following recent National Insurance changes, and provides hope for a more stable environment that can foster long-term growth and investment.

“However, the truth is that it will do little to aid the long-standing challenge of securing affordable finance. What is needed is for the government to switch from listening mode into the execution phase, with SMEs needing tangible solutions to be delivered. As the backbone of our economy, SMEs deserve a clear and consistent policy environment – one that gives them access to capital, regulatory certainty, and the long-term confidence they need to thrive.”

Hamish Martin, Partner at LAVA Advisory Partners, said ,”With the Bank of England finally trimming the base rate to 4.25%, we could well see a noticeable shift in M&A appetite, especially from private equity, who have been slightly more cautious of late with such comparatively high rates.

“Lower borrowing costs open the door for more leveraged deals, and we’re already seeing increased interest in lower-mid-market assets that might have been priced out just a few months ago.

“For founders and business owners considering an exit, this could mark the start of a more favourable window, especially as buyers start to move more decisively and have lower-cost capital at their disposal.”

Stephen Brockway, Chief Research Officer at Maru, said: “While a reduction in interest rates may offer a modest boost to household finances, it’s not a major concern for most people right now – particularly for those without a mortgage.

“Even with a 0.25 percentage point cut, we’re still far from the era of ultra-low, post-Covid mortgage rates.

“Our research shows that concerns about the economy and rising prices driven by the cost of living crisis far outweigh any focus on interest rate movements.

“A small change like this is unlikely to significantly shift consumer confidence. When it comes to the cost of living, the public is increasingly looking for action – not just from politicians, but also from the businesses they engage with. There is growing support for brands that take a clear, proactive stance against rising prices – those seen to be genuinely on the side of the consumer.”

Aaron Peake, Credit Card Expert at credit score service CredAbility, said: “So despite all the talk of inflation falling and rates starting to ease, lenders have continued to hike credit card interest in the background. Most people don’t realise just how expensive borrowing on plastic has become.”

“A cut in the base rate doesn’t immediately mean lower credit card rates. Credit card interest is much less tied to the base rate than mortgages are. Lenders look at wider factors like default risk, consumer demand and overall economic uncertainty. That’s why even when the base rate was frozen earlier this year, card rates kept creeping up.”

“We might see a tiny drop in new credit card offers towards the end of the year, especially if the base rate continues to fall and inflation stays low. But I wouldn’t expect average credit card interest to fall back to pre-2022 levels any time soon. Borrowers should prepare for rates in the high twenties or low thirties to stick around well into next year.”

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