Interest rates are expected to be cut by the Bank of England later, in a move closely watched by households and economists.

Analysts predict the benchmark rate will be cut from 4.75% to 4.5%, given the recent weakness in the UK economy which has seen slow growth.

The Bank uses interest rates as its main tool for controlling inflation, which is currently above the Bank’s target. However, inflation unexpectedly dipped at the end of last year, raising expectations of a rate cut.

Inflation is forecast to rise again though, partly due to changes in the Budget as well as uncertainty around US President Donald Trump’s threatened use of tariffs.

If he does introduce import taxes on countries, it could lead to inflationary pressure globally, causing a knock-on effect on price rises in the UK.

The Bank moves rates up and down to try to control inflation, which measures the pace of overall price rises.

By raising rates, borrowing is made more expensive, so people have less money to spend. People may also be encouraged to save more.

In turn, this reduces demand for goods and slows the rate at which prices are rising.

But it is a balancing act – increasing borrowing costs risks harming the economy as it discourages businesses from investing and creating more jobs.

Once price rises are more under control, then the Bank will consider lowering interest rates.

Its base interest rate heavily influences the rates High Street banks and other lenders charge customers for loans, credit cards and other finance deals.

This is most obviously seen in the cost of mortgages.

About 629,000 households have “tracker” deals and would see an immediate impact from a rate cut. Typically, their monthly repayment would fall by about £29 as a result of the expected 0.25 percentage point cut later.

A similar number of householders have variable rate deals, and lenders will be under pressure to cut their rates if the Bank reduces the base rate.

Fixed-rate deals do not change immediately, but the expectation of further rate cuts could lead to new, or renewing, borrowers getting a better deal.

Savers would be hit by a base rate fall, as the return they receive from banks is likely to be cut.

In December, when rates were held at 4.75%, the Bank’s governor, Andrew Bailey, said it would take a “gradual approach to future interest rate cuts”.

But he added: “We can’t commit to when or by how much we will cut rates in the coming year.”

In the minutes from that meeting, the Bank said there was uncertainty “around how the measures that had been announced in the autumn Budget were affecting growth”.

Following November’s meeting, Mr Bailey would not be drawn on the impact of Trump tariffs on the UK economy, saying “let’s wait and see”.

In the US, the central bank – the Federal Reserve – has indicated it will cut rates at a slower pace this year.

When the Bank announces its interest rates decision at 12:00 it will also share a report on where it sees inflation going in the coming months and could hint at its strategy in response.

Cutting the UK interest rate would strike a balance between “supporting an economy that appears to have ground to a complete halt and preventing inflation from taking off again”, economist Paul Dales from Capital Economics told the BBC.

“Trump’s tariffs are unlikely to influence UK interest rates much,” he added, but wage growth being faster than the Bank’s forecast could influence its decision.

The UK economy grew by less than expected in November, after not growing at all in the previous two months. A further slowdown is expected as businesses brace for rising costs from April because of budgetary changes such as rising National Insurance contributions and higher minimum wages.