Bank of England policymakers lowered interest rates by a quarter to 4.25% to mitigate the impact of the UK economy, opposing the effects of rising economic uncertainty.

The bank's Money Policy Committee (MPC) shift in general expectations also warns that in addition to forecasts made earlier this year, the UK economy will slow further by 0.3% over the next three years.

MPC told Secretary Rachel Reeves that the combination of uncertainty surrounding the impact of U.S. trade policy on the global economy and the cloud hanging on the UK's outlook means growth will almost stagnate for the rest of the year.

The bank said ahead of the trade deal between Keir Starmer and Donald Trump, the bank said economic growth was “considered as a slowdown and expected to remain exhausted in the near term”.

Among the sub-votes, two of the MPCs with nine members voted for the larger 0.5 percentage points, with two votes held at the current 4.5% level, and the bank expressed high caution about the amount of lower interest rates for the rest of the year.

Financial markets expect borrowing costs to be reduced by at least two quarters this year.

But worrying that inflation will continue until the 2% target by 2026 exceeds the 2% target, led the National Institute of Economic and Social Research this week to predict that the bank will only limit it in 2025.

"Inflation pressures continue to ease, so we are able to lower interest rates again today. The past few weeks show that the global economy is unpredictable.

"That's why we need to stick to a step-by-step and careful approach to further cut speed. Ensuring low and stable inflation is our top priority."

The bank said its latest quarterly forecast was based on current tariffs and did not take into account the proposed agreement between the administration secretary and the White House, which was confirmed hours later.

Details of the deal suggest that the UK has reduced car export charges by 27.5%, and steel and aluminum have reduced fees by 25% in exchange for discounts in certain sectors, including agriculture.

However, the Prime Minister made it clear that no matter what carvings there are, the country will still be affected by the global slowdown expected by the trade war.

Bailey said he welcomed the prospect of a deal, calling it "good news, including the UK economy".

He added that it is great that Britain is leading the way” before congratulating those involved on both sides.

The bank's Ratessetters said that in addition to monitoring the impact of trade policies, the £25 billion stake in state insurance contributions from Reeves that came into effect last month will affect employment, wages and prices, although it is unclear to what extent.

MPC members are more worried about surges in inflation this year, largely due to higher council taxes and utility bills, which would cause disproportionate reactions, while consumers have been raised by long-term price increases.

Inflation is expected to average 3.5% in the third quarter, 3.7% from previous forecasts, due in part to the redirection of cheap goods from China and other countries hit by U.S. tariffs.

The bank said: "World export prices are expected to be substantially weak, especially in China, especially in China.

It said gas and oil prices will also lower inflation this year compared to February’s forecast.

Despite low inflation, households may be worried about rising prices and focus their spending on basic projects, limiting the amount of disposable income spent on large commodities, further curbing the economy.

Until the spring of 2027, inflation is expected to make the MPC's 2% target easier.

The Trade Union General Assembly (TUC) said lower economic growth and higher unemployment forecasts mean it should lower interest rates more aggressively.

"Lower borrowing costs will relieve stress on families, help families with weekly budgets and allow them to spend more. This will make investment and development more affordable for businesses," said TUC Secretary General Paul Nowak.

The bank's outlook comes after a series of low-key data on the UK economy, with surveys showing consumer and business confidence waning.

The bank said the result will be a "softer" growth in business investment, which will likely boost the brakes for the hope of UK productivity.

Goldman Sachs said the bank was more silent on price cuts than expected. Investment banks predict that the 8:1 allocation of MPC will help lower interest rates, and there are several signals to support a sick economy.