Bulletin: Lower interest rates and growth

US tariff impacts

As well as imposing 10% tariffs on goods from China and the suspension of 25% tariffs on Mecixo and Canada, the US President has threatened to impose tariffs on the EU and the UK, although, based on recent comments, the UK may be seen as a lower priority.

Direct impacts on the UK food and drink system may be limited but indirect impacts may be more dramatic.

Read our latest article on US tariff policy impacts on the UK food system.

Lower growth and interest rates

The Bank of England Monetary Policy Committee (MPC) has decided to lower interest rates from 4.75% to 4.5%, the lowest level since June 2023. The MPC stated that CPI inflation is expected to “rise quite sharply” to 3.7% in Q3 2025 before “falling back to around the 2% target thereafter.” The MPC is only forecasting GDP growth of 0.75% in 2025, half the rate forecast in November.

Download our FREE latest Viewpoint report: A shaky start to 2025, what’s next? to understand how the UK economy and government finances are likely to remain under pressure in 2025.

Does this decision about interest rates say more about the lack of growth in the UK economy than the desire to control inflation? See our opinion below.

IGD Opinion
The main task of the Monetary Policy Committee (MPC) is to hold the “all items” interest rate within set bounds, by adjusting interest rates. The target rate is 2.0% annually, plus or minus 1%, as measured via the CPI method.

Inflation has proven very persistent in recent years - it fell to 1.7% in September 2024 but picked up again over October to December.

The MPC has previously been very clear that base rates will not be cut further until they are quite certain that excess inflationary pressure has left the economy. 

However, it may be that this position has now been reached. Economic growth is extremely weak, and the economy is threatened by multiple external factors, especially geopolitics. 

Today’s base rate cut may signal a policy transition for the MPC and a new desire to get ahead of broader economic threats.

Households and businesses will likely welcome news of the cut, but they should be clear that the news can be read in two ways. 

It might be seen as confirmation that the UK’s inflation nightmare is likely over, or as news that lack of growth is the new big issue.

UK-EU reset

The Prime Minister attended an EU summit this week, the first Prime Minster to meet the EU since Brexit. The first UK-EU summit will take place in the UK on 19 May.

European Council President Antonio Costa says there is a "new positive energy" in the EU's relationship with the UK.

The government is seeking agreements on plant and animal health and barriers to be removed for agriculture and food trade.

The Minister for European Union Relations said that “to raise living standards, we need to build export and investment opportunities, reducing barriers to trade.”

HFSS update

The government has confirmed that it is committed to implementing the advertising restrictions for less healthy food and drink on TV and online. These restrictions will come into force across the UK on 1 October 2025.

Bird flu update

Cases of highly pathogenic avian influenza (bird flu) are increasing in both kept poultry and wild birds across multiple areas of Great Britain. Avian influenza has been confirmed in commercial poultry at a premises in the East Riding of Yorkshire.