The Bank of England is preparing to announce a cut in UK interest rates on Thursday, with central banks around the world facing increased scrutiny as Donald Trump ramps up his attacks on the US Federal Reserve.

Trump wants lower borrowing costs to boost the economy, even though the US has maintained the highest rate of growth in the G7 richest nations for several years and has every prospect of topping the G7 poll in 2025.

Three days after his inauguration, the president said: “I think I know interest rates much better than they do, and I think I know it certainly much better than the one who’s primarily in charge of making the decision.”

Jerome Powell, the chair of the Federal Reserve, resisted an attack by president Trump last week as US rates were held steady.

Trump’s comments appeared to prompt European Central Bank boss Christine Lagarde to warn against political interference in monetary policy or risk inflation racing up again and causing panic in financial markets.

Against this backdrop, the Bank’s governor, Andrew Bailey, will present its decision on UK rates this week, with a cut from 4.75% to 4.5% widely expected. After two cuts last year, financial markets are expecting three reductions during 2025, to leave the base rate at 4% by the end of the year.

Bailey is no stranger to political pressure himself. Former prime minister Liz Truss threatened to review the central bank’s remit in response to successive interest rate rises as inflation headed above 10%.

Truss has subsequently said that she would have sacked Bailey, but his eight-year contract, and the “deep state”, made that impossible.

This time, the governor is feeling the heat from a different direction, though not unconnected to the latest drama in Washington.

Bailey and his colleagues on the monetary policy committee (MPC) are considering whether a slowdown in economic growth is going to persist – and whether they may be to blame.

At the moment, the chancellor, Rachel Reeves, is taking all the flak for the slowdown as she fights to get business onside with her growth plan after a difficult first few months in office. But attention could switch to the central bank should interest rates in the UK, which are the highest in the G7 – made up of France, Germany, Italy, Japan, the US, UK and Canada – be kept on hold at 4.75%.

Most forecasts have shown the economy staggering this year – much as it did in 2024. Official figures released next month are expected to confirm that growth was virtually flat in the second half of last year.

The UK should still outpace much of continental Europe in 2025, but as victories go, this could be considered of little value. To most Britons it will rank as another year of stagnation.

Bank officials have worried for some time that persistently high wages in the private sector will push inflation up again. More recently, the weakness of the pound against the dollar has caused a headache.

Sterling has fallen after financial markets considered how much the new president’s policies would push up inflation and prevent the Fed from making further reductions in rates. The reaction was one of panic after Trump’s return to the White House was cast as inflationary and previous forecasts of rate reductions in the US were reversed.

The dollar strengthened and the pound fell on the prospect of higher interest rates than expected in the US. A lower pound makes imports more expensive, pushing up inflation.

Some forecasters disagree with the consensus. The International Monetary Fund said in its most recent health check of the UK economy that wage growth was slowing quickly and other inflationary pressures would weaken this year, allowing the MPC to push through four rate cuts to 3.75%.

What most economists agree is that interest rates are punishing the economy and are too high. Killing off the remnants of inflation, as some MPC members want to do, comes at too high a price. UK inflation was 2.5% in December, easing from 2.6% in November but above the Bank’s 2% target.

There are Labour MPs who want to criticise Bailey, but are reluctant to go public, fearing a rebuke from Reeves, who has promised to respect Bailey’s independence.

This leaves Bailey and the MPC to reflect on the damage they will do, not to the Labour government, but the economic outlook, if they follow Powell’s hard line.

The Fed has a strong economy to manage and keep in check. Meanwhile, the Bank is overseeing a weak UK economy in need of a stimulus.