bumper cut — the federal reserve slashes the cost of borrowing by half a percentage point. we take a look at what this says about the us economy. and the bank of england are minutes away from telling us whether they're cutting rates or not. markets think they're staying where they are. welcome to business today. we start in the us, and a big move by the central bank in cutting the cost of borrowing for the first time in overfour years. the federal reserve have dropped the main interest rate in the world's biggest economy by half a percentage point — bringing it down to between 4.75 and 5%.

a drop larger than many expected — with some wondering now if this reflects the scale of the problems facing the american economy — or the success in getting the pace of price rises, inflation, close to the bank's targets. the governor of the fed — jerome powell — says the us economy is in good shape and they intend to keep it that way. our north america business correspondent ritika gupta has the details. the federal reserve has delivered a super—sized interest rate cut aimed at bolstering the us labour market. the half a percentage point cut, the first in over four years, brings its key interest rate, the federalfunds rate, down to between 4.75, and 5%. it comes amid signs inflation in america is continuing to fall, while the job market remains strong even as unemployment has risen this year. the labour market is actually in solid condition.

and our intention with our policy move today is to keep it there. you can say that about the whole economy. the us economy is in good shape. it is growing at a solid pace. inflation is coming down. the labour market is in a strong place. policymakers are expecting to cut rates by a further half a percentage point bringing us interest rates down. while these early initially affect short—term borrowing costs for banks they should spill over to consumer loans such as mortgages, auto loans and credit cards. so a big move from the us and today it's the uk's turn. the bank of england makes its next interest rate decision at noon today with many hoping forfurther drops in the cost of borrowing. but most experts predict it

will keep rates on hold here. the current main interest rate is sitting at 5% — having been cut last month for the first time since march 2020. you'll remember we ended up here after a series of rate rises to try and bring down inflation which hit a peak of 11.1% back in 2022 — since then inflation has been brought down significantly with the latest reading of 2.2% for august. but while the rate of inflation is falling prices are still much higher than four years ago with many people having to make huge sacrifices to make ends meet. as our chief economics correspondent dharshini david reports. getting a dream home for your family has got harder as the cost—of—living crisis pushed up bills including rents, challenging even for those in work.

my family helped move us which helped because we couldn't afford the moving van so they had to chip in. like james and sophia who have had to downsize and faced other tough choices just as their son arrived. when i went on maternity leave i could only go off for about ten weeks to spend with my son because we just could not afford it any more. even that was a major stretch. to the point where we had to put ourselves into a bit of debt. but, you know. the food banks got us through that one. definitely. they were so generous. donating milk and toiletries. the bank of england is very aware of the pain higher prices can inflict and with some still rising pretty quickly it is likely to pause and not cut interest rates again this month. however, take a look at fixed rate mortgage deals. those are coming down because of expectations that rates will fall further in the coming months.

that has injected new life into the property market and increased prices. where does that leave those looking to switch from renting to buying? housing is still quite expensive. for example, if you are a typical earner buying a typical first time property with a 20% deposit, that monthly mortgage payment is now taking about 36% of an average earner�*s ta ke—home pay. and the loan on average is about 30. so you can see it is much more stretched than it was before. the cost of house prices is still high relative to earnings. and because interest rates are so much higher than they were before. analysts think the bank of england will cut again in november. it has to balance out the risks of price pressures re—emerging with the pain borrowing costs are inflicting notjust on buyers but renters, too. dharshini david, bbc news. a lot of economists do not expect there will be any movement on interest rates today largely because of that high—level core inflation, if you strip out the volatile stuff like housing or energy costs or food, you sense inflation is still a problem.

what does it mean for the trajectory of interest rates, is there pressure on the bank of england to follow others? joining me now is bob parker, senior adviser at icma asset management and investors council. that big cut from the vet yesterday, many thinking that is what they would do, does that put pressure on other banks? from the federal bank. ~ ., from the federal bank. with one notable exception, _ from the federal bank. with one notable exception, the - from the federal bank. with one notable exception, the bank - from the federal bank. with one notable exception, the bank of l notable exception, the bank of japan which is raising interest rates, most central banks worldwide, from the states, to europe and asia, are in the process of cutting interest rates. here in europe, we have already had interest cuts from sweden, the swiss national bank, and last month, the first by the bank of england. to answer your question, the global trend, whereas last year

and at the beginning of this year the global trend was for interest rates to stay high or be increased, now the global trend worldwide except japan is for interest rates to come down. i think that global trend will probably persist until at least the end of 2025. the bank of england will be part of that trend. the other question is how low they will go. we are not talking about them going back to the levels we saw after the financial crisis. we need to get used to a new normal. in the case of america, by the second half of 2025, it is reasonable to forecast the federal funds rate will be slightly lower than 4%, consistent with the recent forecast published yesterday by the federal reserve. in the case of the uk, assuming after a small increase in the

headline inflation numbers over the next couple of months, assuming that inflation settles down between 2% and 2.5% next year, growth of i% or 1.5% is not unreasonable to forecast that base rates by the second half of next year will be close to 4%, compared to 5% now. although it is difficult to forecast what the bank of england will do in the coming minutes, by the end of this year, a not unreasonable forecast is that they will cut the base rate twice and continue to cut in the first half of 2025. good to talk to you. let's turn to asia now, because china's top minister for commerce is set to meet the eu's trade commissioner in brussels today amid rising tensions between the two trading powerhouses.

its timing is important with european union countries preparing to meet next week to vote on tariffs on china's electric vehicles. joining me now is duncan wrigley, chief china economist at pantheon macreoeconomics. always good to talk to you. looking at the numbers for these proposals. the commission would propose it tariff of 33.5% on any vehicle built in china on top of the 10% it charges for inputs, a hefty deal. yes, a hefty additional tariff which applies to the car—makers that did not cooperate at the highest level, and many chinese car—makers, electric vehicle makers are likely to struggle with those tariffs. but there are some which are super competitive which will still be able to gain market share any way. why are they doing it, why such a dispute between chinese made goods and those being made in

the european union? is it down to price? the european union says china unfairly supported the development of its electric vehicle makers with subsidies, large subsidies. china disputes that saying itjust has a very competitive market which it certainly does with electric vehicle makers. i think both are true. the reality from the european standpoint if they just allow chinese vehicles in, it would be very difficult for domestic european car—makers to compete. so one thing is they want chinese car—makers to invest in european factories. it is not applicable just in this case but we always say when there is any trade war or tariffs back, the consumer loses out. in this case it might be consumers around europe who will find they can't buy affordable electric vehicles.

that is true. any tariff dispute that involves raising prices, tariffs by its nature are a rax—raising the retail price, making it expensive for the consumer, making it harder for them to obtain because it affects the delivery and supply chains. ., ., ., chains. you might argue going auainst chains. you might argue going against the — chains. you might argue going against the principles - chains. you might argue going against the principles of - chains. you might argue going against the principles of free l against the principles of free trade which we have taken for granted which has brought down prices are so many things. you are right. the reality is the world we live in now, there are two groups of people, consumers used to always be favoured by governments and free—trade advocates. now we are seeing politicians the side of workers working in these factories, the european car—makers, even at the expense of consumers. thank you.

that interest rate decision for you in about 15 minutes.

hello from the bbc sport centre. six more games in the champions league on thursday. five—time winners barcelona are in action, they go to monaco. the spanish giants have had a faultless start to the season. five wins out of five sees them sit top of la liga, the only team with a 100% winning record. the last time they won the champions league however was back in the 2014—2015 campaign. monaco beat barcelona in pre—season but barca boss hansi flick says his side are ready to put on a performance.

stop it is a new situation.