The Bank of England remained inactive, but internal rifts have emerged, with three members voting for an interest rate cut. Action may be taken in August.

The Bank of England (BoE) decided to keep its key interest rate unchanged at 4.25% in its resolution on Thursday (June 19). Economists expect that the bank may wait until August to cut interest rates again.

In its statement, the BoE wrote that during this meeting, six out of the nine members of the Monetary Policy Committee (MPC) voted to maintain the interest rate at 4.25%, while three believed it should be cut by 25 basis points to 4%.

"Real GDP growth in the UK remains weak, and the labour market continues to soften," the statement said. "There are clearer signs that, over time, the space for economic weakness in the UK has emerged."

"Wage growth continues to slow down. As stated in May, the Committee expects wage growth to cool significantly in the remaining months of this year," the statement added. It also noted that the MPC is closely monitoring how the easing of wage pressures will transmit to consumer price inflation.

The BoE warned that global uncertainties remain high, with the escalation of conflicts in the Middle East pushing up energy prices. "The Committee will continue to be sensitive to the increasingly complex economic and geopolitical environment and will keep updating its assessment of economic risks."

The BoE concluded that inflation still poses risks on both sides and pointed out that "given the outlook and ongoing disinflation,it remains appropriate to further remove monetary policy restrictions in a gradual and cautious manner."

The bank had earlier predicted that UK inflation would rise to 3.7% in Q3 before gradually pulling back next year. However, there is significant uncertainty surrounding the global tariff policies introduced by Trump, and tensions in the Middle East may also push up new inflationary pressures.

These pressures, combined with the UK economy's weak performance after contracting by 0.3% in April, have left the central bank in a dilemma over whether and when to cut interest rates.

The day before, John Gieve, a former deputy governor of the BoE, told the media, "Last month, the MPC was deeply divided over whether to make a small interest rate cut, deciding by a narrow margin of 5 to 4 to hold steady."

"Most members believe the economy is slowing down, and if US tariffs and related policies continue to spread, their impact will accelerate this slowdown. That's their concern. The question at the time was, 'Should we cut interest rates now or wait a bit longer?' That was their line of thinking."

"The conflict in the Middle East has further complicated the situation. On the one hand, it may push up oil prices, thereby further driving up inflation; on the other hand, it may disrupt the global economy and trade, once again exerting downward pressure on UK growth."This is exactly the situation the Bank of England is currently facing."

According to media surveys, economists generally expect the Bank of England to cut interest rates by 25 basis points at its next meeting in August and make another cut in Q4.

Gieve stated that a series of external, uncontrollable factors that may drive inflation, coupled with the outlook for growth, taxation, and fiscal expenditure in the UK, have made it more difficult to predict the central bank's strategy.

"The current expectations of the central bank and the market are that, in the absence of major global changes, interest rates will gradually fall to 4% or slightly lower by the end of the year. However, we do not know how the Middle East conflict will evolve, nor do we know the extent of the impact of tariff policies. Therefore, monetary policy decision-makers can only wait and see on a monthly basis."