��������

Dr Tony Syme, macroeconomic expert at the ��������, comments: “For the fourth time in a row, the Bank of England has held interest rates at 3.75%, and for once that is the right call.

“Two of the nine members of the Monetary Policy Committee, Huw Pill and now Megan Greene, voted to raise rates, double the number who broke ranks in the spring. Neither is predicting that energy prices will surge from here and both note the ceasefire in the Gulf. Their worry is subtler. They fear the energy shock will leave a lasting imprint on domestic inflation, feeding into wages, prices and the public's expectations of where it will settle, and would raise rates now as insurance. But that is a bet on a risk, not a reading of the data. Inflation has held steady at 2.8%, undershooting the forecasts, with easing food prices doing much of the work. The second-round effects they fear are not yet showing up. The figures point the other way.

“The Bank is not alone. Only yesterday the US Federal Reserve also held steady, while signalling that its next move could be upwards later this year. Tellingly, the Fed pinned stubborn inflation on energy "supply shocks," putting its finger on the real risk to the outlook.

“That risk is supply-side and international: oil and gas prices set far beyond these shores. The immediate threat is already easing, with an initial deal to reopen the Strait of Hormuz now signed. But it was never a risk that interest rates could address. The Bank Rate is a domestic, demand-side tool. Raising it would do nothing to lower the price of a barrel of oil.

“We have been here before. In 2022 it was the war in Ukraine; today it is the Middle East. On both occasions the pressure on prices came through energy, not an overheating economy. With growth weak and budgets stretched, a rate rise now would deepen the pain while leaving the cause untouched. Holding was wise. Hiking would have been a mistake.”

�������� macroeconomist, Dr Charles Nimoh, adds: “As widely expected, the Bank of England has left interest rates unchanged at 3.75%, reinforcing the message that policymakers remain firmly in “wait and see” mode. While inflation held steady at 2.8% in May, defying expectations of a rise to 3% and easing fears of a renewed acceleration in price growth, the Bank is unlikely to declare victory just yet.

“The decision was shaped by two key factors. First, the latest inflation figures provided reassurance that price pressures are not re-accelerating. Second, easing energy market concerns, supported by a US-Iran peace framework agreement, contributed to a notable fall in oil prices, with Brent crude down almost 5% to around $83 a barrel. Together, these factors reduced some of the immediate pressure on policymakers to tighten further.

“However, the outlook remains uncertain. As Victoria Scholar of Interactive Investor notes, inflation could rise again over the summer following the next Ofgem price cap adjustment, suggesting recent stability may prove temporary, particularly if higher energy costs feed through into household bills later in the year.

“The bigger picture is less about today’s inflation reading and more about the broader trend. The Bank is looking for sustained evidence that wage growth and services inflation are cooling before it considers loosening policy. That means any rate cuts are likely to be gradual and firmly dependent on incoming data.

“For households, the decision brings short-term stability but little immediate relief. Borrowing costs remain elevated compared with pre-inflation shock levels and the average two-year fixed mortgage rate has risen from around 4.8% to the mid-to-high 5% range in recent months. UK Finance also forecasts that around 1.8 million fixed-rate mortgage deals will expire in 2026, meaning a significant number of borrowers could face higher refinancing costs. Savers continue to benefit from relatively attractive deposit rates, although many banks have already begun trimming returns in anticipation of future rate cuts.

“The bottom line? Today’s hold is a pause, not a turning point. The debate in the months ahead is not if rates will move, but when and in which direction. Patience, not optimism, is the order of the day.”