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THE BANK OF ENGLAND on Thursday reduced its key interest rate by 0.25 percentage points to 4 per cent, the lowest level in two and a half years, as it looked to support the UK economy amid continued concerns over US tariffs.
The central bank also forecast that the British economy would grow by 1.25 per cent this year, a slight improvement from its earlier estimate of 1 per cent.
"The direct impact of US tariffs is milder than feared but more general tariff-related uncertainty still weighs on sentiment," the BoE said in a statement.
In May, London and Washington reached an agreement to cut tariffs of more than 10 per cent imposed by US president Donald Trump on certain UK-made products imported by the US, especially vehicles.
Thursday’s rate reduction marked the BoE’s fifth cut since it began a rate-trimming cycle in August 2024.
"Interest rates are still on a downward path, but any future rate cuts will need to be made gradually and carefully," said BoE governor Andrew Bailey.
The BoE’s primary objective is to maintain the UK’s annual inflation rate at 2.0 per cent. However, the most recent data showed inflation had risen to an 18-month high in June.
The Consumer Prices Index climbed to 3.6 per cent, with motor fuel and food prices remaining elevated.
Weak economy
Official data showed the UK economy contracted for a second consecutive month in May, and unemployment reached a near four-year high of 4.7 per cent.
The contraction has been attributed in part to prime minister Keir Starmer’s Labour government raising UK business taxes from April. That same month, the country became subject to Trump’s 10 per cent baseline tariff on most goods.
Finance minister Rachel Reeves welcomed the BoE’s decision.
"This fifth interest rate cut since the election (win by Labour in July 2024) is welcome news, helping bring down the cost of mortgages and loans for families and businesses," she said in a statement.
Last week, the US Federal Reserve held interest rates steady, resisting political pressure from Trump to lower borrowing costs to stimulate the US economy.
Asked about tariffs, Fed chair Jerome Powell said at a press conference, "We're still a ways away from seeing where things settle down."
The European Central Bank is expected to keep interest rates unchanged at its next meeting, as eurozone inflation remains close to its two per cent target. However, economists have noted this could change depending on the impact of Trump’s tariffs on the euro area.
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Donald Trump speaks with the press as he meets with Narendra Modi in the Oval Office of the White House in Washington, DC, on February 13, 2025. (Photo: Getty Images)
INDIAN exporters on Thursday warned that additional US tariffs could render many businesses "not viable" after president Donald Trump ordered a steep hike in levies on Indian goods over New Delhi’s purchase of Russian oil.
Stocks opened slightly lower, with the benchmark Nifty index falling 0.31 per cent after the initial 25 per cent US tariff came into effect. The levy is set to double to 50 per cent from August 28, following Trump’s order on Wednesday penalising India’s continued imports of Russian oil.
India is the second-largest buyer of Russian crude, benefiting from discounts amid Western sanctions. The US move is aimed at cutting Moscow’s oil revenue, which is used to fund the war in Ukraine.
India’s foreign ministry called the new US tariffs “unfair, unjustified and unreasonable.”
Exporters fear impact
SC Ralhan, president of the Federation of Indian Export Organisations (FIEO), said the decision would significantly affect trade.
"This move is a severe setback for Indian exports, with nearly 55 per cent of our shipments to the US market directly affected," he said in a statement.
"The 50 per cent reciprocal tariff effectively imposes a cost burden, placing our exporters at a 30–35 per cent competitive disadvantage compared to peers from countries with lesser reciprocal tariff."
Ralhan added that "many export orders have already been put on hold" as buyers reconsider sourcing.
For many small to medium-sized businesses, margins are already thin, he said. "Absorbing this sudden cost escalation is simply not viable."
Tariff could hit growth
The US is India’s largest trading partner, with exports to the country amounting to $87.4 billion in 2024.
"If the extra 25 per cent tariff that president Trump has announced on imports from India remains in place, India’s attractiveness as an emerging manufacturing hub will be hugely undermined," said Shilan Shah of Capital Economics.
Shah said US spending supports around 2.5 per cent of India’s GDP. He added that a 50 per cent tariff is "large enough to have a material impact", potentially reducing economic growth to closer to six per cent this year and next, down from the current forecast of seven per cent.
Modi says farmers’ interests come first
prime minister Narendra Modi, responding publicly for the first time, said India would not compromise the interests of its farmers.
"For us, our farmers' welfare is supreme," Modi said at an event in New Delhi. "India will never compromise on the wellbeing of its farmers, dairy (sector) and fishermen. And I know personally I will have to pay a heavy price for it."
While Modi did not directly name the US or mention the stalled trade talks, his comments were seen as a defence of India's position.
Trade negotiations between the two countries broke down after five rounds, mainly over India’s reluctance to open up its farm and dairy sectors and its continued purchase of Russian oil.
The Indian foreign ministry described the US move as “extremely unfortunate” and said it would “take all necessary steps to protect its national interests.”
India calls US move illogical
Dammu Ravi, secretary of economic relations in India’s foreign ministry, said the US decision lacked justification.
"The US tariff hike lacks logic," Ravi told reporters.
"This is a temporary aberration, a temporary problem that the country will face, but in course of time, we are confident that the world will find solutions."
New diplomatic efforts
India is already signalling a possible shift in diplomatic strategy. Modi is planning his first visit to China in over seven years, which may indicate a reassessment of global alignments.
Brazilian president Luiz Inacio Lula da Silva said on Wednesday that he would initiate a BRICS-level discussion on how to address the tariffs. He said he planned to call both Modi and China’s Xi Jinping. The BRICS group also includes Russia and South Africa.
India’s Ravi added that "like-minded countries will look for cooperation and economic engagement that will be mutually beneficial to all sides."
Political and industry response
Modi is facing growing calls to respond firmly to the US decision, with both his supporters and opposition leaders urging a strong reaction.
"India's national interest is supreme. Any nation that arbitrarily penalises India for its time-tested policy of strategic autonomy, rooted in the ideology of non-alignment, does not understand the steel frame India is made of," said Congress party president Mallikarjun Kharge.
Industry groups also voiced concern. Sudhir Sekhri, chairman of the Apparel Export Promotion Council, said: "There is no way the industry can absorb such a steep hike." He called for fiscal support from the government.
Reliance Industries, led by Mukesh Ambani, said in its annual report that ongoing geopolitical and tariff-related uncertainties could affect trade flows and the demand-supply balance.
India's equity market fell another 0.5 per cent on Thursday, hitting a three-month low. The muted reaction reflected investor expectations that the tariffs could still be negotiated down.
(With inputs from agencies)
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Reeves said that measures in the last budget already targeted the wealthy.
CHANCELLOR Rachel Reeves has indicated there will be no wealth tax, saying those with the “broadest shoulders” have already contributed through existing levies.
Reeves has faced calls from Labour MPs, unions, and former minister Anneliese Dodds to impose new taxes on the savings, investments and property of the wealthy.
Dodds told the Sky News Electoral Dysfunction podcast that the Wealth Tax Commission had “looked at the operation of lots of different wealth taxes” and set out how one could work in the UK. She said she hoped the Treasury was considering the evidence and other proposals.
Reeves said that measures in the last budget already targeted the wealthy.
“We got rid of the non-domicile status in our tax system, so people who make Britain their home have to pay their taxes here. We introduced increased taxes on private jets, on second homes, and increased capital gains tax, so I think we’ve got the balance right in terms of how we tax those with the broadest shoulders,” she said.
Reeves said decisions on tax would be made in the budget, adding that the government’s priority was to grow the economy, attract investment and create jobs.
The Times reported that she is preparing to raise taxes in the autumn budget to address a £30 billion gap in public finances.
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Donald Trump and Narendra Modi shake hands as they attend a joint press conference at the White House on February 13, 2025.
INDIA is holding trade discussions with the United States, an Indian government source said on Friday, a day after US president Donald Trump signed an order imposing a 25 per cent tariff on Indian exports.
Trump announced high import duties on several countries, including 35 per cent on goods from Canada, 50 per cent for Brazil, 20 per cent for Taiwan and 39 per cent for Switzerland, according to a presidential order.
A US delegation is expected to visit New Delhi later this month, the source said to Reuters.
"We remain focused on the substantive agenda that our two countries have committed to and are confident that the relationship will continue to move forward," India's foreign ministry said on Friday.
Trade talks between the two countries have been delayed over issues such as access to India's agriculture and dairy sectors.
The tariffs could affect nearly $40 billion worth of exports from India, the world's fifth largest economy, the source said.
Without an agreement, the tariffs would place India under stricter trade conditions than other major economies, potentially affecting its economy.
The source said India would not compromise on its agriculture and dairy sectors and would not allow dairy imports due to religious opposition to animal feed in such products.
On Wednesday, Trump also threatened more penalties on India over its commercial ties with Russia and its membership in the BRICS group. There is no clarity yet on these penalties. Trump accuses BRICS of following "anti-American policies".
A senior US official said on Thursday that differences between the two countries cannot be resolved quickly to reach a trade deal.
The US has a trade deficit of $46 billion with India.
(With inputs from Reuters)
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The UK Supreme Court will issue a verdict that could reshape the car finance industry
Supreme Court to deliver ruling at 4:35pm today on £44bn car finance mis-selling scandal
Judgment concerns hidden commissions paid to dealers without disclosure to buyers
Potential for billions in compensation claims if appeal court ruling is upheld
FCA expected to confirm next steps within six weeks
Lenders argue practices were lawful; Treasury warns of market impact
Supreme Court Poised to Rule on Landmark Car Finance Case
The UK Supreme Court will issue a verdict that could reshape the car finance industry and trigger billions of pounds in compensation claims for mis-sold motor finance.
The judgment, expected at 4:35 pm Friday, will determine whether to uphold a Court of Appeal ruling from October, which found that undisclosed commissions paid by lenders to car dealers or brokers were unlawful.
The Test Case: Undisclosed Broker Commissions
The case centres around two lenders – FirstRand Bank and Close Brothers – who were found to have paid commissions to dealers arranging finance deals, without disclosing the amount or terms of those payments to borrowers.
This practice was deemed unlawful by the Court of Appeal. If the Supreme Court upholds that ruling in full, the decision could pave the way for millions of customers to seek redress for loans arranged under similar conditions.
Wider Financial Implications for the Industry
The car finance market is deeply embedded in UK car sales, with around 90% of new cars and a significant proportion of second-hand vehicles bought on finance.
A full ruling against lenders could result in huge financial liabilities for the sector. Lloyds Banking Group, heavily exposed through its Black Horse division, has already set aside £1.2 billion in anticipation of potential claims.
The Financing & Leasing Association, which represents lenders, has continued to maintain that no wrongdoing occurred.
The Role of Discretionary Commission Arrangements
At the centre of many complaints are Discretionary Commission Arrangements (DCAs), which were banned by the Financial Conduct Authority (FCA) in 2021. Under DCAs, dealers could increase their commission by steering customers toward higher interest rates.
Thousands of consumers who purchased vehicles using DCAs before the ban are already in line for possible compensation.
What Happens Next
The FCA is expected to announce within six weeks of the Supreme Court ruling whether it will establish a centralised compensation scheme for affected borrowers. However, today’s ruling could dramatically widen the pool of those eligible for payouts if it affirms the appeal court’s full findings.
If the judges side with the lenders, the scope of potential redress will be much narrower.
Government Concern Over Financial Fallout
The UK Treasury had previously raised concerns about the potential financial impact of large-scale compensation, warning it could significantly disrupt the car finance market. The Supreme Court rejected the government’s unusual intervention request in February, affirming judicial independence in the matter.
While the Treasury supports fair outcomes for consumers, it has also cautioned that the sector must remain capable of providing essential finance options for car buyers.