The move was widely anticipated by the markets, and suggests a cautious reaction to the current economic situation.
At its meeting ending yesterday (18 June 2025), the MPC voted by a majority of 6:3 to hold the bank rate at 4.25%. Three members preferred to reduce the bank rate by 0.25 percentage points to 4%.
The rate was cut from 4.5% to 4.25% at the committee’s May meeting.
Committee members noted that there has been substantial disinflation over the past two years, as previous external shocks have receded and as the restrictive stance of monetary policy has curbed second-round effects and stabilised longer-term inflation expectations.
They said this has allowed the MPC to “withdraw gradually some degree of policy restraint, while maintaining bank rate in restrictive territory so as to continue to squeeze out existing or emerging persistent inflationary pressures”.
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Nicholas Mendes, mortgage technical manager at John Charcol, said: “The Bank of England has kept interest rates on hold at 4.25%, in a move widely expected by markets and one that speaks to the increasingly muddled backdrop facing policymakers.
“Headline inflation held steady at 3.4% in May, as falling fuel and air fare prices were offset by stickier components elsewhere. 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. Core inflation held firm too, coming in at 3.5%. Wage growth remains strong, and although the jobs market has started to cool, with unemployment nudging up to 4.6%, there is not yet enough to convince the bank that underlying inflationary pressures have been fully contained.
“Then there is the global picture. 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. Any disruption to oil flows through the Strait of Hormuz could quickly feed through to prices at the pump and the CPI.”
Paul Noble, CEO of Chetwood Bank, said: “A hold today is the cautious choice, but leadership means more than playing it safe. 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 economy has been through the ringer, with the Chancellor’s plan providing domestic pressures to add to those caused by the US, Russia, and beyond. However, the central bank continues to act as though inflation is the only variable that matters.
“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 savers, the risk is time – it’s vital to find [the] best returns, to stay flexible, and to stop letting handwringing on Threadneedle Street dictate their outcome.”
