Bank of England Holds Firm: Interest Rates Frozen at 4.25% Amid Economic Crossroads

The Old Lady of Threadneedle Street just hit snooze—again.

No surprises as the BoE keeps rates locked at 4.25%, betting on stagnation over stimulation. Traders yawn, markets shrug, and your savings account continues its race to the bottom.

Meanwhile, crypto traders chuckle as their decentralized yields laugh at legacy finance's timid 4.25% ceiling. The irony? Traditional banks now pay less interest than a DeFi dust wallet.

One question lingers: When will central bankers realize that 'wait-and-see' isn't a strategy—it's surrender?

Bharier says mounting uncertainty delays further rate cut

⚠️ BoE on hold. 3 voted for a cut inc. Deputy Gov Ramsden (seen this before where he votes for a cut, rest of MPC follow). Nod to weaker activity & labour market. BoE waiting to see how this impacts CPI (it is!). Gradual constraint for rate cuts is starting to loosen $GBP pic.twitter.com/cbtfmpd2Cg

— Viraj Patel (@VPatelFX) June 19, 2025

David Bharier, the Head of Research at British Chambers of Commerce (BCC), said yesterday’s CPI data confirmed that inflation remained stubbornly high, so today’s decision by the Bank of England to hold interest rates came as no surprise. He pointed out that businesses remained under pressure from sharply rising costs. 

Bharier also claimed that the recent national insurance hike had added notable strain domestically, with BCC’s research showing eight-in-ten firms expected a negative impact. He added that the “bewildering maze” of shifting tariff announcements was driving up the cost of global trade. He said these factors together dampened business sentiment, which was yet to recover. 

“Now, with further escalations in the Iran-Israel conflict, the economic risks are rising alongside the tragic human cost. Any major disruption to key shipping routes could trigger a repeat of the 2021 supply chain crisis, which fuelled soaring inflation.”

–David Bharier, Head of Research at BCC Insights

Bharier stressed that businesses and households were increasingly anxious for further rate cuts as borrowing costs ROSE to their highest since the 2008 crisis. He added that the BoE was looking to take a gradual path, but the current wave of uncertainty could slow that down.

Bailey says inflation is expected to return to the 2% target

BoE’s Bailey said inflation was expected to return to the 2% target, but policymakers would need to see more evidence before deciding on future rate cuts. The economy was expected to grow around 0.25% in the second quarter of this year, slightly stronger than in the BoE’s May forecast, though the bank said the underlying pace was weak. 

The BoE left its forecast for inflation broadly unchanged for the second half, seeing a peak rate of 3.7% in September and an average of just under 3.5% for the rest of 2025. Britain’s May inflation reading of 3.4% was higher than anywhere else in Western Europe. Policymakers said the recent greater contribution of regulated prices to UK inflation could account for some of that difference. 

Brad Holland, the Director of Investment Strategy at Nutmeg, also pointed out that services inflation and wage growth continued to “run hot,” and external factors such as tariffs and global conflict created too many unknowns. However, he believed that getting inflation down to a more manageable level was crucial to lowering interest rates. He also noted that the “neutral rate,” where the UK economy was expected to deliver price stability, lies around 3%.

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