Bank of England cuts interest rates by 0.25% amid global economic uncertainty

Of the four members voting against, two preferred a more substantial reduction of 0.5% to 4%, while the other two wanted to maintain rates at 4.5%.

This marks the MPC’s first meeting since Donald Trump’s tariffs announcement, which has created significant uncertainty in the global economy. Prospects for global growth have weakened as a result – although the negative impacts on UK growth and inflation are likely to be more modest.

The effect will be partially cushioned by the UK/US trade deal, expected to be announced later today (8 May).

Reflecting on the interest rate decision, the committee stated: "Based on the Committee’s evolving view of the medium-term outlook for inflation, a gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate.

"The Committee will continue to monitor closely the risks of inflation persistence and what the evidence may reveal about the balance between aggregate supply and demand in the economy.

"Monetary policy will need to continue to remain restrictive for sufficiently long until the risks of inflation returning sustainably to the two percent target in the medium term have dissipated further. The Committee will decide the appropriate degree of monetary policy restrictiveness at each meeting."

Shawbrook’s chief banking officer for commercial, Neil Rudge, suggested SMEs would be breathing a sigh of relief following the news.

He added: "The duelling factors of the increase to employer National Insurance contributions and the wider turmoil caused by the proposed imposition of tariffs has created significant uncertainty, particularly for SMEs who export internationally.

"Despite the looming uncertainty, falling inflation and now, a reduction to the interest rate is quietly good news for the UK, and should help to spark further growth moving forward.

"With experts predicting several more rate cuts this year, SMEs should begin to see the cost of borrowing come down further at a time when pressures are mounting."