Bank of England expected to hold rates as inflation cools
Households and businesses are likely to see no immediate relief as the Bank of England is set to keep rates at 3.75%, despite inflation cooling to 2.8%.
Mortgage holders, savers and small firms are heading into another pause in borrowing costs as the Bank of England is expected to keep Bank Rate at 3.75% on June 18. That matters less for the policy drama in London than for the monthly bills it shapes, because Bank Rate is the UK’s core interest rate and feeds directly into mortgage pricing, savings returns and business borrowing costs.
The decision comes after official figures showed inflation easing, but not enough to reopen the door to an immediate cut. UK consumer price inflation held at 2.8% in May, unchanged from April’s 13-month low and below forecasts from economists and the Bank of England. Core inflation, which strips out more volatile items, edged up to 2.6% from 2.5%, suggesting underlying price pressures are still cooling only gradually.
That backdrop has left no room for complacency. The Monetary Policy Committee had already voted 8-1 on April 29 to keep rates unchanged at 3.75%, with one member backing a rise to 4%. In its explanation, the Bank said conflict in the Middle East had made the outlook for global energy prices highly uncertain, a warning that has kept expectations of more easing in check even after earlier rate cuts.
The latest hold would mark a sharp contrast with the end of 2025, when the Bank cut Bank Rate by 0.25 percentage points to 3.75% on December 17 in a 5-4 vote. That was the fourth cut of the year and had raised hopes that more reductions would follow in 2026. Instead, the combination of stubborn inflation, volatile energy markets and wider global instability has slowed that momentum.
Sterling briefly fell after the inflation data and UK borrowing costs eased, but the movement was modest rather than decisive. For households locked into variable-rate mortgages, the message is that relief is arriving slowly. For savers, the hold helps preserve higher deposit rates a little longer. For businesses, especially those refinancing loans or planning new investment, the pause keeps financing costs elevated for now.
The Bank’s next decision is due at 12:00 noon GMT on June 18, and expectations are clear: after a year of cuts and a spring marked by geopolitical risk, the central bank is choosing caution over speed.
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