Bank of England Holds Rates at 4.25% Amid Growing Divergence and Geopolitical Risks

The Bank of England maintained its benchmark interest rate at 4.25% in a 6-3 vote, signaling mounting internal dissent as policymakers grapple with stubborn inflation and external shocks. Rising energy prices and weak growth complicate the path forward, even as Governor Andrew Bailey hints at potential cuts by August.

Oil's surge past $75 per barrel—fueled by Middle East tensions and U.S. tariff threats—has revived inflationary concerns, with UK CPI still hovering at 3.4% against a 2% target. Investec's Sandra Horsfield notes energy price risks have "moved up the agenda" following Israel-Iran escalations.

Bailey struck a cautious tone, acknowledging the global economy's unpredictability while monitoring labor market pressures and oil-driven inflation. The pause reflects what Bharier calls "mounting uncertainty" delaying further monetary easing—a stance that could prolong crypto's appeal as an inflation hedge.