Bank of England cuts interest rate as US tariffs hit economy

The Bank of England on Thursday cut its key interest rate by a quarter point to 4.25 percent as the threat of US tariffs starts to weigh on economic growth.

The central bank's fourth such reduction in nine months, which had been widely expected by markets, contrasts with a decision by the US Federal Reserve on Wednesday to freeze borrowing costs.

The Bank of England update meanwhile came shortly after Donald Trump announced an agreement with Britain on trade, the first such deal since the US president launched his global tariffs blitz.

"This will be good news all round, including for the UK economy," BoE governor Andrew Bailey told a press conference following the rate decision.

"It will help to reduce uncertainty," he added.

Following a regular meeting in London, the BoE noted that "prospects for global growth have weakened as a result of... tariff announcements".

Nevertheless the BoE hiked its forecast for annual UK gross domestic product growth this year, to one percent from 0.75 percent.

It said British economic output was predicted to reach 1.25 percent next year, down from the central bank's previous estimate of 1.5 percent given in February.