The UK, European Union (EU) and a host of Asian economies are at risk of falling into recession this year after President Trump increased tariffs on U.S. imports to the highest level in more than a century. Economists are ripping up their forecasts for global growth and inflation after the Administration hit 60 of its trading partners with import taxes that raise the average tariff rate from 2.5% to 25.1% according to UBS. Economists predict that the UK is facing a growth hit of around 1.5% this year, pushing an already weak UK economy into recession. Although the UK avoided a high reciprocal tariff rate – with a baseline of 10% applied to all goods imported to the U.S. – the impact of existing 25% tariff levies on cars and steel, alongside a loss of business confidence and disruption across the global economy, would drag UK growth substantially lower.

The Monetary Policy Committee (MPC) has kept the Bank Rate on hold at its March meeting and has warned investors against assuming that interest rates would be cut quickly as it grapples with uncertainty hanging over the domestic and global economies. The MPC voted 8-1 to keep borrowing costs at 4.5%. The MPC cautioned that there was no presumption that monetary policy was on a pre-set downward path over the next few meetings. Meanwhile all 61 economists who took part in the latest Reuters monthly poll of economists still expect the next Bank Rate cut in May, followed by further reductions in August and November that would reduce Bank Rate to 3.75% by year-end.

The Bank of England (BoE) has launched its 2025 bank capital stress test for the UK’s seven largest and most systemic banks and building societies. The test will be published in the fourth quarter of this year. The test involves a hypothetical stress scenario which will be used to assess the resilience of the UK banking system to deep simultaneous recessions in the UK and global economies that includes among other factors: large falls in asset prices; higher global interest rates; and a stressed level of misconduct costs.

The UK Government has decided that the UK’s payments regulator will be abolished and its remit absorbed by the Financial Conduct Authority (FCA) as it aims to cut red tape in favour of growth. The Payment Systems Regulator (PSR) which oversees payment systems (including MasterCard and bank transfers) tackles problems such as fraud, excessive fees and lack of competition among banks and payment providers.

The deposit protection limit for savers – if their bank or building society fails – could be raised from £85,000 to £110,000 under new proposals from the Bank of England. The Financial Services Compensation Scheme (FSCS) deposit protection limit is to rise by £25,000, or by 29%, to reflect inflation over the past 8-years and better protect savers.

Santander UK plc has won its bid to throw out a lawsuit that had alleged lenders have a duty to try and retrieve funds stolen by customers that turn out to be fraudsters. The UK Supreme Court ruled that there was no freestanding duty upon a bank to take positive steps to unwind harm already caused to a third party who was not its customer. The Court opined that banks would face an unacceptable burden on banks going outside their contractual obligations with their customers.

During the month, Moody’s downgraded the long-term credit ratings of Close Brothers Ltd and its Parent (Close Brothers Group plc) and maintained the review-for-downgrade status to reflect the agency view that the Group’s profit margins are likely to compress further competitive pressures from reduced affordability of SME borrowers in the current higher interest rate environment while growth is constrained by the need to preserve its risk-based capital in order to keep a buffer against potential redress costs for undisclosed motor finance commission payments. Meanwhile Fitch raised the outlook for Commonwealth Bank of Australia to “Positive” to reflect the Bank’s stronger earnings profile that (in the agency view) may also have a positive impact on capital generation and the leverage position – as well as reflecting the build-up of junior debt buffers to address loss absorbing capacity requirements. In addition, S&P upgraded the long-term credit ratings of Saudi National Bank with a “Stable” outlook as part of a general rating action on three main Saudi banks to equalise their ratings with that of the sovereign rating to reflect the agency view that the country’s ongoing social and economic transformation is underpinned by improving governance effectiveness including deepening domestic capital markets.