LONDON — The Bank of England is anticipated to lower interest rates later today, marking its second reduction in a three-month period as inflation has dropped to its lowest rate in over three years.

Despite this expected cut, analysts express concerns about potential inflation trajectory shifts, particularly in light of last week’s budget announcement by the new Labour government, which features tax increases, and the anticipated economic implications from U.S. President-elect Donald Trump.

Currently, the Bank is expected to decrease its primary interest rate by a quarter of a percentage point, bringing it down to 4.75%. In August, the central bank’s Monetary Policy Committee, consisting of nine members, cut interest rates for the first time since the onset of the COVID-19 pandemic in spring 2020.

Throughout the pandemic, many central banks raised borrowing costs sharply from near-zero levels as inflation began to surge. This inflation was initially driven by ongoing supply chain challenges, followed by a spike in energy prices due to Russia’s extensive military actions in Ukraine. With inflation rates now decreasing from their peaks, these banks are beginning to reduce interest rates once again.

Experts believe that the Bank of England’s decision-makers are confident that inflationary trends in the U.K. have moderated sufficiently, allowing them to alleviate some financial pressure on companies and home loan holders. As of September, inflation was reported at 1.7%, the lowest since April 2021, and below the central bank’s target of 2%.

This decision arrives shortly after Treasury chief Rachel Reeves revealed plans for approximately 70 billion pounds (around $90 billion) in additional government spending, which will be funded through elevated business taxes and borrowing. Economists are concerned that this spending spree, along with businesses potentially offsetting the tax increases by raising their prices, could trigger higher inflation rates in the coming year.

James Smith, an economist at ING, stated, “While the budget won’t alter the bank’s intent to reduce rates again, it raises questions about our longstanding belief that the pace of rate cuts will accelerate from this point onward.”

Moreover, today’s rate decision comes just a day after Trump won the U.S. presidential election. His planned policies of tax reductions and the imposition of tariffs on select imported products upon taking office next January could lead to inflationary pressures in both the U.S. and globally. This scenario might compel the Bank of England to maintain higher interest rates than initially projected.

The U.S. Federal Reserve is also predicted to be less concerned about the impact of a potential second Trump administration when it wraps up its own policy meeting today. Similar to the Bank of England, the Fed is expected to announce a reduction of its key interest rate by a quarter of a percentage point.