There is growing speculation of a pick up in the pace of Bank of England interest rate cuts as the outlook for the UK economy darkens, with fresh data suggesting a renewed slump in consumer confidence. While the Office for National Statistics (ONS) reported a tentative 0.4% rise in retail sales volumes during March, a closely-watched measure of the consumer mood, covering the current month, fell back sharply. GfK's confidence barometer showed a four point decline to -23, with worries about the economy and personal finances driving that fall. At the same, a respected reading of corporate health by the consultancy Begbies Traynor reported a 13% leap in the number of firms facing "critical" financial distress. It all bolsters recent evidence that the economy is slowing in the face of US protectionism and rising bills for both businesses and households alike - with the challenges only growing since the start of the month. But it has also led both economists and financial markets to agree that the gloomier outlook from growing challenges makes it easier for the Bank of England to accelerate interest rate reductions, starting next month, despite forecasts of a big lift to inflation ahead. A weakening economy and rising inflation The UK was among the major economies hardest hit by a series of growth downgrades issued by the International Monetary Fund (IMF) this week. It was not a message the chancellor would have wished to hear on her visit to Washington for the body's spring meetings, given the government's stated priority of growing the economy. Please use Chrome browser for a more accessible video player 2:00 IMF slashes UK growth forecast Rachel Reeves is bidding, during her trip, to help secure a US tariff truce for the UK through the form of a new trade deal in a bid to relieve some of the challenges facing the public finances. But in its assessment, the IMF declared some of the UK's problems were home grown. Chief among them is inflation. Businesses are tipped to be raising prices to help account for tax rises in the chancellor's autumn budget - costs that lobby groups warn will also harm jobs and investment. At the same time, household spending power has also been hurt by a surge in essential bills since the beginning of April, with those for energy, water and council tax among those marching ahead by far more than the current pace of price growth. Inflation is forecast to rise from this month, potentially breaching the 3% mark by the year's end. Please use Chrome browser for a more accessible video player 6:28 'We're confident', says Reeves Trade war the biggest threat It is clear the trade war is already having a big impact on confidence and activity across the sectors which account for the bulk of UK output. A closely-watched index of activity in the service and manufacturing industries fell into negative territory this week, showing its weakest reading since November 2022. The survey of purchasing managers by S&P Global found export orders falling at their fastest pace since early 2020. How this could all affect thinking at the Bank of England On the same day that report was released, LSEG data showed financial markets had fully priced in a Bank of England rate cut on 8 May. It was on the back of remarks by a member of the monetary policy committee (MPC) that the trade war could place downwards pressure on UK inflation, largely because the UK's decision not to respond to Donald Trump's import duties through reciprocal tariffs could make the country a destination for cheaper goods from Asia and Europe. It has led some to speculate a bumper Bank rate cut of half a point to 4% is on the cards. Read more: Could Trump tariffs push world into recession? America's safe haven status is in troubled waters Get Sky News on WhatsApp Follow our channel and never miss an update. Tap here to follow Be the first to get Breaking News Install the Sky News app for free Others see a more gradual acceleration, with the market data showing an easing to 3.5% by December is possible. Such a scenario would come as a welcome boost to hard pressed borrowers, especially those seeking a new fixed term mortgage deal given the leap in rates witnessed since 2022. Rob Wood, chief economist at Pantheon Macroeconomics, wrote in a note this week: "All told, we think the MPC [monetary policy committee] has enough evidence for precautionary back-to-back rate cuts in May and June, but it cannot jump into easing with both feet going for 50bp [basis point] reductions or green-lighting four or more further cuts this year - because of rising inflation pressures. "The MPC still has a difficult growth-inflation balancing act to pull off, although the growth side is worsening most."