Decision comes amid economic uncertainty and rising global risks
The Bank of England (BoE) has kept its benchmark interest rate unchanged at 4.25%, maintaining a cautious stance as policymakers weigh rising geopolitical tensions, stubborn inflation, and uneven domestic economic data.
This marks the fifth consecutive meeting where the central bank has either held or cut rates, with four reductions since August 2024. The most recent cut came in May, when the Monetary Policy Committee (MPC) hinted at a gradual path toward further easing.
The Monetary Policy Committee voted by a majority of 6-3 to keep interest rates at 4.25%
— Bank of England (@bankofengland) June 19, 2025
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“When it cut the base rate in early May, the MPC strongly indicated that further cuts would follow,” said Paresh Raja, chief executive of Market Financial Solutions. “But economic and political landscape, both in the UK and globally, continues to evolve at pace – pronounced turbulence and uncertainty made a hold today almost inevitable.”
Indeed, the UK economy continues to show signs of strain. GDP unexpectedly contracted by 0.3% in April, reflecting the impact of higher taxes on businesses, increased household costs, and a notable fall in exports to the United States.
“Headline inflation held steady at 3.4% in May, as falling fuel and air fare prices were offset by stickier components elsewhere,” said Nicholas Mendes, head of marketing at London broker John Charcol. “But beneath the surface, the picture is still sticky. Services inflation, a key measure the bank keeps a close eye on, eased to 4.7%, still some way off the 2% target.”
Mendes also noted that core inflation remains elevated and wage growth has stayed strong despite a softening in the labour market. The UK unemployment rate has risen slightly to 4.6%, but that has not been enough to fully ease underlying price pressures.
Global risks are also a factor. “The threat of fresh energy shocks, particularly if tensions in the Middle East escalate further, adds another layer of risk the Bank cannot afford to ignore,” Mendes added.
While financial markets continue to anticipate one or two rate cuts later in the year — possibly starting in August — the bank is expected to proceed with caution, balancing inflation control with support for economic recovery.
“A hold today is the cautious choice, but leadership means more than playing it safe,” commented Paul Noble, chief executive of Chetwood Bank. “The MPC’s decision will be welcomed by some, but it’s another example of cautious drift over clear direction. Holding their ground may make sense given chaotic global pressures, but it’s not the decisive leadership our economy needs.
“The MPC’s lack of action piles on greater uncertainty for mortgages as well, leaving would-be buyers in the lurch. This cautious approach could lead to greater paralysis when what markets need is a catalyst.”
For Raja, “lenders cannot afford to dwell on decisions from Threadneedle Street, and should focus on what they can control.”
“With the prospect of multiple rate cuts in the second half of this year now fading, it’s vital that lenders continue to adapt their products and offerings in line with borrowers’ needs,” he said. “If they can do that, investors should have the confidence to execute their plans, helping to unlock activity across the market despite the higher-rate environment.”
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