Bank of England cuts benchmark interest rate

The Bank of England governor suggests that US tariffs and those announced by other countries in retaliation could slow down growth across the world.

Andrew Bailey says he hopes that isn't the outcome, but that it is possible. 

"The impacts on inflation are much more ambiguous," he adds. 

"It depends on the reaction of other countries to the tariffs, whether that leads to a redirection of trade and what impact that has on exchange rates.

"You can't make a clear and unambiguous prediction of what would happen to inflation in this context. We of course will follow it very closely." 

There had been talk that inflation is now less important to the Bank's decision-making.

But Andrew Bailey shoots this down - specifically any suggestion that "stagflation" (when inflation remains high, but economic growth stays flat) has influenced the Bank's judgement today.

The governor says he doesn't use the word "stagflation" but wants to focus on the "second part of the term" - inflation.

"I really would come back to that point that our judgement today is really anchored on a view that we think the disinflation trend is in place," he says.

He adds this is the "heart" of the decision.

Our data and economics editor Ed Conway is at the Bank's news conference and asks the governor what impact the chancellor's growth plan will have on the economy. 

Andrew Bailey says he is a "very strong supporter" of the growth agenda, saying potential growth rates in the UK have been low since the 2009 financial crisis. 

He notes that government policies take time to materialise and the Bank is looking at a two to three-year timeframe for them come through. 

"But that does not mean it doesn't matter and won't have a positive impact," he adds. 

Deputy governor Clare Lombardelli jumps in, telling Conway that she expects to see changes to forecasts off the back of the government's plan in the "longer run". 

"These things are important to everyone right across the UK economy as we all know it's the only way to get rising real incomes in the long term," she adds. 

With increased uncertainty and risks to inflation, the Bank rate is "not on a pre-set path", Andrew Bailey continues.

As our data and economics editor Ed Conway noted below at 12.07pm, forecasts are now hard to predict - and this is a stance echoed by the Bank of England's governor.

Bailey says there are "risks in the global economy" and warns projections are not "conditioned on any change in global tariffs" - possibly a nod to Donald Trump's threat to add tariffs to various countries and trading blocs. 

"This Bank rate is not on a pre-set path, with increased uncertainty and risks to inflation on both sides," he says.

"From the near-term outlook to UK activity in inflation and from developments in the global economy, we must also proceed carefully, judging the evidence afresh at each meeting."

The governor, asked why he's added the word "careful" to his description of the bank's outlook, says: "Let me emphasise... the greater uncertainty that we face in the current environment. And, as I said, that uncertainty is both domestic and global."

Bank of England governor Andrew Bailey kicks off the news conference by saying he hopes more interest cuts are coming - but that those decisions depend on inflation. 

He says the Bank predicts inflation will rise this year from the current 2.5%, peaking at about 3.7% before returning to the 2% target. 

"We live in an uncertain world and the road ahead will have bumps," he says, adding that the Bank rate will be set to ensure inflation hits 2% "sustainably". 

"Low and stable inflation is the foundation of a healthy economy and we will do our job to ensure that." 

He explains that inflation will be pushed up by energy prices and food and goods prices, hitting its peak in the middle of the year. 

From 12.30pm, members of the Bank's Monetary Policy Committee will be answering questions from journalists, including data and economics editor Ed Conway.

We'll pick out the key moments here and you can watch live above.

While the Conservatives have welcomed the base rate cut, they say the government's "disastrous budget" is likely to mean fewer rate cuts than expected this year. 

Shadow chancellor Mel Stride said: "This will be welcome news for many families and businesses who have been hit hard by Labour's mismanagement.

"Sadly, their disastrous budget is likely to mean fewer rate cuts this year than previously anticipated.

"Under new leadership, the Conservatives will back business and our nation of entrepreneurs to create jobs and wealth.

"That is the only way to grow our economy so everyone can have a more secure future."

Data and economics editor Ed Conway alluded to this below but it's worth picking out on its own: the Bank of England has just cut its growth expectation for the UK in 2025 from 1.5% to 0.75%.

This, clearly, is a significant blow for the government and chancellor.

The BoE says the UK will only narrowly avoid a recession - and that it estimates the economy shrank between October and December.

We'll know for sure on this next Thursday.

While savers might be disappointed by the Bank of England's decision to cut rates, savings expert Anna Bowes from The Private Office has said it could provide them with an opportunity. 

She explains that today's cut means we are sure to see more rate reductions - not only on the accounts currently available to open, but also on existing variable rate accounts.

But adds that savers should use this as a reminder to review their savings and see if they can make it "work harder before rates start to fall in earnest".

According to data consultancy CACI and the Yorkshire Building Society, there is an extraordinary £400bn earning 1% or less. 

"You could get four times that if you are prepared to shop around and switch to a better account, even if you still need easy access to your money," Bowes tells Money. 

"For those who can lock some of their cash up, there are still plenty of competitive inflation-busting fixed-term accounts to be found.

"Thankfully, many top savings rates are already still paying well above inflation, even after tax.

"If you're looking to protect yourself from further potential rate cuts and hedge against inflation, maybe consider locking some of your savings for the longer term. 

"If inflation remains at its current level, or better still does drop to 2%, you'll be happy if you are earning comfortably more than the rising cost of living for the entire term of your savings account. 

"But remember there is no access to fixed-term bonds before maturity, so be sure you can afford to tie it up."

Rachel Reeves has just reacted to the Bank of England's announcement - part of which comes as a serious blow to her efforts to grow the economy.

The chancellor welcomed the decision to cut the interest rate but said she is still "not satisfied" with the growth rate - after the Bank slashed its forecast for growth, predicting the economy will just miss entering a recession. 

"This interest rate cut is welcome news, helping ease the cost of living pressures felt by families across the country and making it easier for businesses to borrow to grow," Reeves said. 

"However, I am still not satisfied with the growth rate. Our promise in our Plan for Change is to go further and faster to kickstart economic growth to put more money in working people's pockets."