Bank of England holds rates at 3.75% amid inflation uncertainty

Governor Andrew Bailey characterized the decision as an "active hold," maintaining that current policy exerts sufficient pressure on the economy despite market speculation about future cuts. While external member Megan Greene and Chief Economist Huw Pill advocated for a quarter-point increase to anchor household inflation expectations—currently at their highest levels since 2009—the majority of the committee favored patience. The central bank expects inflation to climb above 3.25% by the final quarter of the year, though this forecast is more tempered than previous projections.

Economic prospects appear marginally brighter than earlier estimates, with the bank noting an underlying growth rate of 0.2% per quarter. Officials remain wary of the long-term impact of energy costs, noting that even if a U.S.-Iran truce stabilizes oil prices, the pipeline of inflationary pressure from the past four months remains a significant hurdle. Sterling slipped to its lowest level since April 7 following the announcement, as investors pushed back expectations for a rate hike until at least December.