Bank of England to delay rate call as May cut nears certainty

The Bank of England will delay its much-anticipated interest rate decision tomorrow (Thursday, May 8) by precisely two minutes to observe a national moment of silence marking the 80th anniversary of Victory in Europe Day.

In a brief statement issued on Tuesday, the central bank confirmed that the Monetary Policy Committee (MPC) would publish its verdict at 11:02 BST, rather than the customary 11:00, with accompanying minutes and economic forecasts also released at the same time.

The symbolic pause is a rare alteration for Threadneedle Street, which last postponed a rate announcement in 2022 following the death of Queen Elizabeth II.

But while the delay is short, the stakes could hardly be higher. The MPC is expected to announce its first rate cut since the Bank began tightening monetary policy in 2021, lowering the base rate by 25 basis points to 4.25%.

Financial markets have priced in near certainty of such a move. However, a growing number of economists – including some former Bank insiders – have begun to question whether the step will go far enough.

This week’s decision follows a turbulent month for the global economy, triggered by former US President Donald Trump’s so-called “Liberation Day” tariff push, which analysts say could reroute global trade flows and dampen UK growth just as inflation appeared to be under control.

“The near-term UK growth outlook already looked challenging – recent US tariff announcements have added to the headwinds,” said Edward Allenby, UK economist at Oxford Economics. “[A] May cut is a done deal, and the MPC could signal a less cautious approach [to cutting rates] ahead.”

In March, UK inflation dropped to 2.6%, better than expected, but the outlook has since soured. Analysts now forecast a summer spike to 3.7%, driven by higher energy and food prices, well above the Bank’s 2% target. And while some US tariffs may dampen inflation by diverting goods to European markets, others may stoke it by raising input costs.

Andrew Bailey, the Bank’s governor, flagged the risk of a “growth shock” last month during the IMF’s Spring Meetings in Washington. The IMF itself has revised the UK’s 2025 growth forecast down from 1.6% to 1.1%, citing Trump’s economic nationalism and the fragility of global trade.

Amid this climate, voices within the City are pushing for bolder action. Analysts at Morgan Stanley believe rates may need to fall to 3.25% by year-end, warning that a one-and-done approach could backfire.

“The intellectual reasoning underpinning a potential 50bp cut is fairly simple,” they said. “Why does the UK economy, with a weak labour market [and] pay settlement surveys at close to target-consistent levels… need interest rates as elevated as 4.5%?”

External MPC member Swati Dhingra is widely expected to vote for a larger cut, continuing her push for more aggressive easing in the face of subdued hiring intentions and weakening business confidence.

For the UK’s small and mid-sized businesses, the direction of travel on rates will be closely watched. Theo Chatha, Chief Financial Officer at Bibby Financial Services, sees a cut as a double-edged sword.

“All signs point to a May rate cut from the Bank of England – a potential green light for SME investment, as over six in 10 (62%) SMEs say they will feel more confident investing if rates fall. But in today’s uncertain climate, a cut no longer holds the promise it once did.

On paper, lower rates should be a boost for SMEs and the economy, easing borrowing costs and encouraging business investment. But relief from a cut could be short-lived, as the Bank may need to raise rates again later in the year to curb inflationary pressure due to tariffs friction.

This threatens to dampen SMEs’ ambition – meaning investment plans are delayed further, but SMEs can’t afford a ‘wait and see’ approach to decision making. Against economic uncertainty, businesses that continue to invest and plan for every scenario will stay ahead of the competition.”

Despite the Bank’s famously slow-moving reputation, it is clear that the next few months will test the MPC’s flexibility like few periods since 2008. As Britain pauses for a solemn moment of reflection, markets will be counting the seconds—not just to the announcement itself, but to the pace and scale of what follows.