LONDON (dpa-AFX) - The Bank of England maintained interest rates unchanged on Thursday as inflation in the U.K. has remained persistently above the target and geopolitical tensions escalated, raising the upside risks to inflation.
The BoE Monetary Policy Committee, led by Governor Andrew Bailey, voted 6-3 to hold the Bank Rate at 4.25 percent. Three members preferred to reduce the rate by 25 basis points.
The U.K. central bank has reduced the benchmark interest rate four times since last August. The previous change was in May, when the rate was lowered by 25 basis points in a three-way split on the rate-setting body.
A majority of MPC members said the disinflationary progress had continued, but there was not a strong case for a further easing of monetary policy at this meeting.
They expect inflation to stay around 3.5 percent over the second half of this year before falling back towards the 2 percent target from next year.
'Given the outlook, and continued disinflation, a gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate,' the bank said.
The committee noted that underlying economic growth remained weak, the labor market continued to loosen, leading to clearer sign that a margin of slack opened up over time.
Policymakers remain vigilant to the extent to which easing pay pressures will feed through to consumer price inflation, the bank said.
The MPC said it will remain sensitive to heightened unpredictability in the economic and geopolitical environment, and will continue to update its assessment of risks to the economy.
'With borrowing costs at their highest since the 2008 crisis, businesses and households are increasingly anxious for further rate cuts,' British Chambers of Commerce Head of Research David Bharier said.
The bank is looking to take a gradual path, but the current wave of uncertainty could slow that down, the economist noted.
'Despite weaker jobs numbers, the Bank of England is showing little sign that it's about to pick up the pace of easing,' ING economists said.
Barring any more serious spike in oil prices, the bank is likely to cut interest rates in August and November and twice more in 2026, they added.
The interest rate announcement came a day after the U.S. Federal Reserve held rates steady. However, Fed officials still expect two interest rate cuts this year, lowering the federal funds rate to a range of 4.0 percent to 3.75 percent by the end of 2025.
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