Former Bank of England deputy governor Charlie Bean has called for an aggressive 0.5 percentage point rate cut at the next policy meeting in May, lowering UK interest rates to at least 4%, in response to the financial turmoil sparked by Donald Trump’s new trade tariffs.
Bean, who also served as chief economist at the Office for Budget Responsibility (OBR), warned that Trump’s tariff war has wiped trillions off global markets, damaging business and consumer confidence. He argued that the “crazy situation” in the US would severely impact the UK economy, forcing the Bank to act more decisively than expected.
Previously a supporter of higher rates, Bean now believes the uncertainty caused by Trump’s policies including a 10% baseline tariff on all US imports, with even higher rates on the EU (20%) and China (34%) will lead businesses to delay investments and households to cut spending.
David Blanchflower, another former Bank policymaker, backed Bean’s stance but urged the Bank to hold an emergency meeting before the scheduled 8 May decision to implement a deeper rate cut. Blanchflower, who warned against rate hikes before the 2008 financial crisis, stressed that falling consumer confidence could push the UK toward recession.
Financial markets currently predict a 0.25-point cut in May, followed by two more reductions this year, bringing rates down to 3.75%. However, Bean insists a larger, immediate cut is needed to counter the economic shock.
The OBR recently warned that a similar global trade conflict could shrink UK national income by 1%, extending the current economic stagnation by another year.
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