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Published: 19/06/2025
The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 6–3 to keep the base rate at 4.25% at its June meeting(1).
Three members of the committee voted to reduce the rate to 4%.
In setting out the context to the vote, the MPC said: ‘There has been substantial disinflation over the past two years, as previous external shocks have receded, and as the restrictive stance of monetary policy has curbed second-round effects and stabilised longer-term inflation expectations.
‘This has allowed the MPC to withdraw gradually some degree of policy restraint, while maintaining Bank Rate in restrictive territory so as to continue to squeeze out existing or emerging persistent inflationary pressures.’
The committee added that energy prices have risen due to conflict in the Middle East and it would remain ‘sensitive to heightened unpredictability’ across economic and geopolitical landscapes.
In making its decision, the committee cited disinflation, lower-than-expected private sector wage growth, and subdued consumer spending and underlying growth as reasons for a more careful approach to monetary policy.
It reported: ‘The Committee will continue to monitor closely the risks of inflation persistence and what the evidence may reveal about the balance between aggregate supply and demand in the economy.
‘Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further. ‘
Reacting to the decision, Dr David Crosthwaite, chief economist at BCIS, said: ‘With inflation not falling and the situation unfolding in the Middle East, the Bank of England was always likely to hold rates at 4.25%. However, the elevated cost of borrowing is not likely to encourage investment in construction, which is one way of boosting the economy.
‘Given the sticky nature of inflation and the subdued economic growth we are experiencing, it feels like we are in a period of stagflation. The challenge will be in trying to reverse that position.’
The MPC’s next vote will be published on Thursday 7 August 2025.
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(1) Bank of England – MPC minutes – here
