Bank of England Raises Interest Rates to 5% in 2025 – Largest Increase Since 2008
In June 2025, the Bank of England surprised markets by increasing interest rates by 50 basis points, reaching the highest level since 2008 to tackle persistent inflation.
In a bold move to curb soaring inflation, the Bank of England (BoE) raised its key interest rate by 0.50%, setting it at 5%—the highest since the 2008 financial crisis. This marks the 13th consecutive rate hike since December 2021, underlining the central bank's commitment to stabilizing the U.K. economy amid rising costs.
Highlights:
- The unexpected 50 basis point increase surpasses market expectations, with most analysts predicting a smaller 25 basis point rise.
- Core inflation surged to a 31-year peak of 7.1%, fueling the BoE’s aggressive response.
- The U.K. now faces the highest inflation rate among G-7 nations, significantly outpacing the United States’ 4% annual inflation.
The decision was supported by a 7-2 vote from the Monetary Policy Committee (MPC), reflecting concerns over stubborn inflation that remains well above the 2% target. Despite a reduction from last October’s 11% peak, inflation in the U.K. remains notably resilient compared to other major economies.
Senior economist Jennifer Lee from BMO Capital Markets noted, "While most major economies have seen inflation ease, the U.K. continues to experience persistent price pressures, with monetary tightening effects gradually permeating the economy."
The BoE has signaled readiness to implement further rate hikes if inflation does not decline, emphasizing its commitment to restoring price stability. The bank stated, "The MPC will adjust Bank Rate as necessary to return inflation to the 2% target sustainably in the medium term."
For ongoing updates on economic policies and market reactions, stay tuned to our latest coverage.
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