06:57 AM EDT, 06/20/2025 (MT Newswires) -- The Bank of England on Thursday decided to leave the Bank Rate unchanged at 4.25%, as expected, said UBS.

The decision was supported by six Monetary Policy Committee (MPC) members, with three voting for a 25bps rate cut. The outcome of the vote was somewhat more dovish than the bank's and consensus expectations of only two MPC members supporting another cut.

Following Thursday's pause, UBS expects the BoE to resume cutting on Aug. 7 (-25bps), followed by another 25bps rate reduction on Nov. 6, bringing Bank Rate to 3.75% by end 2025. While the bank thinks that ongoing easing in underlying services inflation should allow the BoE to continue with its gradual approach to easing, similar to the MPC, UBS sees two-sided risks around the inflation outlook.

On the downside, uncertainty about the extent of growth damage from the United States tariffs. On the upside, the recent sharp rise in oil prices and ongoing uncertainty about the speed of the pass-through of labor market easing into wage dynamics and ultimately inflationary pressures.

In 2026, UBS predicts the BoE to cut rates three times (February/May/July) to a terminal rate of 3.0%. The bank's call for this year is broadly in line with market expectations (-51bps at the time of writing), but the bank remains more dovish than the market for 2026 (-20bps).