The Bank of England announced its decision to keep its benchmark interest rate at 4.25%, driven by growing concerns about inflation and an unstable economic situation.
Bank of England's Decision
The Bank of England (BoE) decided on Thursday to keep its interest rate at 4.25%. This widely anticipated decision comes amid fears that the conflict between Israel and Iran could escalate and that U.S. tariffs might further fuel inflation. With UK inflation at 3.4%, above the BoE’s target of 2%, policymakers are likely mindful of the impact on oil prices, which have recently risen above $75 a barrel.
Experts' Opinions on Future Rate Cuts
BoE Governor Andrew Bailey hinted at the possibility of future rate cuts, which some believe could happen as soon as August. Bailey noted that rates remain on a gradual downward path but warned of high unpredictability in global affairs and expressed concerns over the labor market and wage growth. Investec’s economist Sandra Horsfield mentioned that risks to energy prices have intensified due to developments in the Middle East.
Inflation and Economic Growth Forecasts
Bailey stated that inflation is expected to return to the 2% target, though policymakers need to see more evidence before deciding on future rate cuts. The economy is expected to grow around 0.25% in Q2, slightly stronger than BoE’s May forecast, but underlying growth remains weak. David Bharier, Head of Research at British Chambers of Commerce, emphasized that businesses continue to face pressure from sharply rising costs.
The Bank of England finds itself in a challenging position, balancing the need to control inflation while supporting economic growth, with further changes in interest rates likely dependent on global market developments and domestic economic factors.
