Analysts predict two interest rate cuts by end of 2025

In the United Kingdom, the monetary policy committee (MPC) is planning to maintain the current base interest rate of 4.25% in the upcoming meeting. Recent economic indicators, including higher-than-expected inflation rates and volatility from global political tensions, have influenced this decision. As of May 2025, inflation reached 3.4%, compelling the MPC to pause any further cuts for now. Analysts anticipate the MPC’s decision on June 19, 2025, to be a split vote, highlighting the division among the committee members regarding the monetary policy direction. However, looking ahead, most analysts project that there will be at least two interest rate cuts by the end of 2025, possibly in August and November. These cuts are anticipated to lower the base rate to around 3.75%. This prospective reduction reflects growing concerns surrounding inflation and its impacts on consumer spending power. Economic experts suggest that these cuts could be beneficial for mortgages and other forms of borrowing, while savers are encouraged to find optimal savings rates in the meantime. Factors that will heavily influence the MPC’s decisions include job and wage growth data, inflation levels, and external economic pressures. Notably, the UK’s labor market has shown signs of easing, with payrolls falling significantly in May 2025 and private sector pay growth slowing. These metrics could ease concerns among MPC members regarding persistent wage inflation, which tends to drive overall inflation higher. Additionally, fluctuations in global oil prices pose serious implications for inflation trends in the UK economy, potentially hindering consumer spending capabilities. As the committee contemplates the potential rate decreases, it becomes imperative to monitor both domestic economic indicators and global developments that may affect the UK market in the coming months. The stability of the pound against the dollar and overall investor confidence will play crucial roles in shaping the economic landscape as this year progresses.