London – The Bank of England (BoE) has once again held interest rates at 4.25%, marking its fifth consecutive pause as it continues to tread carefully through a landscape riddled with economic uncertainty — both at home and abroad.
In a statement released Thursday, the Monetary Policy Committee (MPC) cited “elevated global risks”, pointing directly to tensions between Israel and Iran, volatile oil prices, and persistent concerns over inflation resilience.
But here’s the twist: while rates remain unchanged for now, Governor Andrew Bailey hinted at a possible shift in August, suggesting that the BoE may finally be preparing to ease policy — provided inflation continues to cool and the labour market shows signs of stabilising.
What’s Driving the Decision?
Global unease remains a major concern for central banks. For the BoE, maintaining the current base rate is an attempt to balance inflation control with economic fragility.
Recent conflict-related fluctuations in oil prices have triggered fears of a supply shock ripple effect — which could eventually push UK inflation back upwards.
While core inflation has slowed slightly in Q2 2025, wage growth and services inflation remain “stickier than expected,” according to the MPC minutes.
“We’re seeing progress, but not enough to declare victory,” Bailey said during the press briefing. “The outlook remains highly data-dependent.”
Key Data Points from the Bank of England
| Indicator | Current Status |
|---|---|
| BoE Base Rate | 4.25% (unchanged) |
| UK Inflation (May 2025) | 3.2% (down from 3.6%) |
| Wage Growth | 5.3% (Q1 2025) |
| Unemployment | 4.4% (rising slowly) |
| Oil Prices | ~$75/barrel (volatile) |
Bank of England: The UK Economy Is Still in a Tight Spot
The BoE’s cautious stance comes at a time when UK households are still grappling with the cost-of-living crisis, albeit with some signs of improvement.
Energy prices have moderated since the 2023–24 peak, but food prices and rent remain elevated. Consumer demand is subdued, and credit card debt continues to rise among lower-income groups — a red flag for future financial stress.
Meanwhile, the BoE faces a tricky communications challenge: rate cuts might relieve pressure on borrowers, but they also risk fuelling another round of inflation if implemented prematurely.
What Could Happen in August?
Markets are currently pricing in a 60–70% chance of a 0.25% rate cut in August, according to S&P Global and Bloomberg projections.
“If we see sustained progress on inflation and wage moderation, August is definitely in play,” says Rachel Ng, economist at CapitalEconomics UK.
Bailey’s language was notably softer this time around — describing the rate path as “under review” and “open to adjustment”.
This shift in tone is a marked departure from his hawkish comments earlier this year, when inflation hovered above 5%.
What It Means for You
➤ Mortgage Borrowers
- Fixed rates remain high, but lenders may start pricing in future cuts.
- Variable-rate borrowers will likely see no change — for now.
➤ Savers
- Interest rates on savings accounts, ISAs, and bonds remain competitive — but could fall later this year.
- Consider locking in fixed rates if you want stability.
➤ Businesses
- SMEs with loans or credit lines may soon see slightly lower borrowing costs, depending on August’s decision.
- Business confidence remains fragile, particularly in retail and hospitality.
Bottom Line
The BoE is clearly keeping a close eye on both geopolitical risks and domestic indicators — and it won’t move unless the data gives a clear green light.
But for now, August is shaping up to be a key turning point. Whether that means relief for mortgage holders or a new era of cautious optimism, we’ll be watching the charts — and the headlines — very closely.
