The Bank of England’s Monetary Policy Committee (MPC) has decided to maintain the Bank Rate at 4.25% following its meeting that concluded on June 18, 2025. The decision was reached with a majority vote of 6-3, where three members advocated for a reduction by 0.25 percentage points to bring the rate down to 4%.
The MPC’s decision comes amid ongoing disinflationary trends over the past two years, attributed to receding external shocks and a restrictive monetary policy stance that has stabilized long-term inflation expectations. This approach has allowed for some withdrawal of policy restraint while keeping the Bank Rate in a position to counter persistent inflationary pressures.
Recent data indicates weak underlying UK GDP growth and a loosening labor market, suggesting an opening margin of slack over time. Pay growth measures have moderated, with expectations of further slowing throughout the year. The committee remains cautious about how easing pay pressures might influence consumer price inflation.
Consumer Price Index (CPI) inflation rose to 3.4% in May from 2.6% in March, largely due to regulated prices and previous energy price hikes. Inflation is expected to stay around current levels for the rest of the year before moving towards the target next year.
Global uncertainty continues, with rising energy prices linked to Middle East conflicts contributing to economic unpredictability. The MPC acknowledges two-sided risks to inflation and maintains that monetary policy will not follow a pre-set path but will adapt based on economic assessments.
In their deliberations, committee members considered international economic conditions, noting progress in US trade negotiations with China and the UK but also highlighting continued trade policy uncertainties affecting global markets.
Six members voted in favor of maintaining the current rate, citing ongoing disinflationary progress and limited impact from recent global developments on this decision. Three members preferred a rate cut due to evidence of labor market loosening and subdued consumer spending, arguing that overly restrictive policies could lead to deviations from the inflation target.
The stock of UK government bonds held for monetary policy purposes stood at £590 billion as of June 18.
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