The Bank of England left interest rates unchanged at 4.25%, with a 6–3 vote split hinting at growing internal pressure to cut. The BOE emphasized that policy was not on a preset path as rising energy prices and weak growth complicated the path ahead amid easing inflation. The Bank of England (BoE) decided to keep its benchmark rate at a 2-year low of 4.25% on Thursday as widely anticipated. The rate held as fears grew that the conflict between Israel and Iran would escalate and that U.S. tariffs would further fuel inflation. With U.K. inflation at 3.4% above the BoE’s target rate of 2%, policymakers were likely to be mindful of the impact on oil prices, which have risen sharply in recent days to over $75 a barrel. Sandra Horsfield, Economist at Investec, said the risk to energy prices had intensified and moved up the agenda given developments in the Middle East. Following the BoE announcement, the central bank’s Governor Andrew Bailey hinted at cutting rates in the future, which some believe could happen as soon as August. Bailey said rates remained on a gradual downward path, but warned the world was highly unpredictable and expressed concerns over the labour market and wages. He also said the Bank was monitoring the escalating tensions in the Middle East , particularly its impact on rising oil prices and therefore on inflation. Bharier says mounting uncertainty delays further rate cut ⚠️ BoE on hold. 3 voted for a cut inc. Deputy Gov Ramsden (seen this before where he votes for a cut, rest of MPC follow). Nod to weaker activity & labour market. BoE waiting to see how this impacts CPI (it is!). Gradual constraint for rate cuts is starting to loosen $GBP pic.twitter.com/cbtfmpd2Cg — Viraj Patel (@VPatelFX) June 19, 2025 David Bharier, the Head of Research at British Chambers of Commerce (BCC), said yesterday’s CPI data confirmed that inflation remained stubbornly high, so today’s decision by the Bank of England to hold interest rates came as no surprise. He pointed out that businesses remained under pressure from sharply rising costs. Bharier also claimed that the recent national insurance hike had added notable strain domestically, with BCC’s research showing eight-in-ten firms expected a negative impact. He added that the “bewildering maze” of shifting tariff announcements was driving up the cost of global trade. He said these factors together dampened business sentiment, which was yet to recover. “Now, with further escalations in the Iran-Israel conflict, the economic risks are rising alongside the tragic human cost. Any major disruption to key shipping routes could trigger a repeat of the 2021 supply chain crisis, which fuelled soaring inflation.” – David Bharier , Head of Research at BCC Insights Bharier stressed that businesses and households were increasingly anxious for further rate cuts as borrowing costs rose to their highest since the 2008 crisis. He added that the BoE was looking to take a gradual path, but the current wave of uncertainty could slow that down. Bailey says inflation is expected to return to the 2% target BoE’s Bailey said inflation was expected to return to the 2% target, but policymakers would need to see more evidence before deciding on future rate cuts. The economy was expected to grow around 0.25% in the second quarter of this year, slightly stronger than in the BoE’s May forecast, though the bank said the underlying pace was weak. The BoE left its forecast for inflation broadly unchanged for the second half, seeing a peak rate of 3.7% in September and an average of just under 3.5% for the rest of 2025. Britain’s May inflation reading of 3.4% was higher than anywhere else in Western Europe. Policymakers said the recent greater contribution of regulated prices to UK inflation could account for some of that difference. Brad Holland, the Director of Investment Strategy at Nutmeg, also pointed out that services inflation and wage growth continued to “run hot,” and external factors such as tariffs and global conflict created too many unknowns. However, he believed that getting inflation down to a more manageable level was crucial to lowering interest rates. He also noted that the “neutral rate,” where the UK economy was expected to deliver price stability, lies around 3%. Cryptopolitan Academy: Coming Soon - A New Way to Earn Passive Income with DeFi in 2025. Learn More
