Bank of England keep interest rate at 4.25%

Bank of England keep interest rate at 4.25%

19 Jun 2025

Simeon Willis, Chief Investment Officer, XPS Group, said: Following the release of the inflation figures yesterday, the market was pricing in a likelihood of staying at 4.25% at around 9 in 10, so this decision comes as no surprise.

It’s difficult for interest rates to fall when inflation is so much above the 2% target. In addition, we will need to wait 3 months before we have some higher inflation months from 2024 dropping out of the 12-month calculation.

Geopolitical risks are also in play, with concerns that conflict in the Middle East could push oil prices higher. That said, despite recent increases, oil is still comfortably within its trading range of the past few years.

The Bank is walking a tightrope. April’s GDP data showed a 0.3% monthly contraction, so there’s a clear need to support growth, even if that remains secondary to the core goal of controlling inflation.

For pension schemes, the backdrop remains relatively favourable: longer-term yields are still elevated, while inflation expectations have eased, offering something of a best-of-both-worlds scenario.