Today the 19 June 2025, the Bank of England’s Monetary Policy Committee (MPC) voted to keep the base interest rate at 4.25%, maintaining a cautious stance as it navigates high inflation and a weakening UK economy.
Why Did the Bank Hold Rates?
The vote was split 6โ3, with three members in favor of cutting the rate to 4%. However, the majority opted for stability, citing several key concerns:
1. Inflation Still Above Target
Although inflation has dropped from its 2022 peak, it stood at 3.4% in May 2025โstill well above the Bankโs 2% target.
2. Geopolitical Uncertainty
Ongoing tensions in the Middle East, particularly between Israel and Iran, have caused oil prices to rise, which adds pressure to inflation and raises risks for global markets.
3. Slowing Growth
After a strong start to the year, the economy shrank by 0.3% in April, and growth for the second quarter is forecast at just 0.25%. This slowdown makes aggressive rate cuts more likely later in the year.
4. Labour Market Cooling.
Recent data shows the job market is starting to cool. Payroll employment dropped by over 100,000, and unemployment has started to rise.
What Does This Mean for the UK Economy?
For Homeowners and Borrowers
If you have a tracker or variable mortgage, your payments wonโt change immediately. However, if you’re hoping for relief, a rate cut might come later in 2025.
For Savers
Savings rates remain the same as some lenders are offering decent returns.
For Businesses
With borrowing costs still high and demand cooling, businesses remain cautious about investment and hiring decisions.
What Happens Next?
Many economists expect the Bank of England to start cutting interest rates as early as August 2025, with another potential cut in November. If those predictions hold, the Bank Rate could drop to around 3.75% by the end of the year.
However, the Bank remains focused on dataโespecially wage growth, inflation trends, and global risksโbefore committing to any changes.