Bank's former deputy Governor calls for aggressive rate cut

Speaking to The Guardian, he said an aggressive strategy is needed to combat the fallout from Trump’s tariff war – adding that uncertainty over the next few weeks would force businesses to delay investments and hit consumer spending.

He explained: "It is not just the tariffs that are the problem, it is the huge uncertainty these actions have created, delaying buying and investment decisions by businesses and consumers."

Explaining why a much bigger cut was needed, he added: "In November 2008, the markets expected a 0.25 percentage point cut, or maybe a half a percent. But we were talking to our agents in the regions, and they said business orders had fallen off a cliff.

"It was obviously a very serious situation.

"We surprised everyone with a cut of 1.5 percentage points. It was huge and it needed to be."

Following last week’s decision by the Trump administration to impose import tariffs on all goods entering the United States, global markets have been in turmoil – with the sell-off seen wiping off at least $10tn in value from equity markets worldwide.

This economic climate has led Paul Johnson, the director of the Institute for Fiscal Studies, to suggest the UK could be heading for a recession – suggesting the instability this has caused will leave people "a lot worse off".

Speaking to Times Radio, he said: "It’s clearly an indication that people think companies will make less profit and that could mean more in the way of layoffs and redundancies. Unless something happens, we are certainly in for a period of much slower growth than we were expecting, quite possibly a recession as a result of the actions of one man."

Asked whether deals aimed at mitigating Trump’s tariffs would support the UK economy, he said: "I rather fear we’re screwed either way."

He went on to say: "If it became clear that there was a road through this to different levels of tariffs, then that may be positive for the markets. But uncertainty is going to be damaging whatever [the situation]."

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