Bank of England Stays Cautious as Global Tensions Keep Markets on Edge
The Bank of England held firm on its 4.25% interest rate at the June 2025 meeting—a move that’s sending ripples through financial markets. While everyone hoped the central bank would ease up, at least three Monetary Policy Committee (MPC) members wanted a 0.25% cut. But the rest felt the situation was just too risky to blink first. The MPC has inflation front and center on its mind, with May's consumer price index still running hot at 3.4%. That’s far from the bank's 2% comfort zone.
What’s keeping the Bank so cautious? A lot of it ties back to the drama in the Middle East. The ongoing Israel-Iran conflict isn’t just making headlines—it’s driving up oil prices. Higher energy prices mean more pressure on businesses, costlier living for the average Brit, and inflation that just won’t let up. This uncertainty spills over into everything from grocery bills to the cost of filling up your car. The Bank’s Governor has openly called these geopolitical risks “a wild card we can’t ignore.”
Inside the UK, things are shifting, but not at lightning speed. Demand is starting to cool. Job growth is slowing, with unemployment numbers rising slightly and some employers putting hiring on hold. Wage growth, which has been fueling some of the inflation, is now showing signs of chilling out. Still, the Bank says it needs more proof that inflation will keep trending down before making big rate moves.
Division Among Experts: When Will the Cuts Finally Arrive?
This careful approach is dividing economists and market watchers. Some believe the Bank has waited too long, arguing that a rate cut now could ease burdens for mortgage holders and small businesses. Others worry that moving too fast could wipe out hard-won progress against inflation.
- Pantheon Macroeconomics expects just one cut before the year’s out.
- ING is calling for two.
- Deutsche Bank is out front, projecting as many as three cuts if the data lines up.
It’s all hanging on what happens with both global events and local numbers. Energy prices, consumer spending, and paychecks will dictate the MPC’s next moves. The upcoming meetings—set for August, September, November, and December—promise plenty of suspense.
For now, borrowers and savers are stuck in wait-and-see mode. The Bank of England has made clear it’s playing the long game, trying to steer inflation back down to that magic 2% without rocking the economic boat. Whether that patience will pay off—or if external shocks will force a change—is anyone’s guess.