The Bank of England is now expected to keep its interest rate steady at 4% for the rest of 2025. This shift in expectation follows the latest inflation report, which showed prices rose 3.8% in July—higher than the 3.7% forecast. Just a few months ago, many believed there would be at least one more rate cut this year, especially as the economy grew slowly and wage increases showed signs of cooling. A new trade deal with the U.S. had also boosted hopes.

However, the tone changed after the Bank of England's meeting in August. The decision to keep the rate unchanged was close—five voted to cut, four wanted to hold. The central bank made it clear that it remains cautious about any move that might reignite inflation. In particular, it stressed the importance of tackling persistent inflationary risks, especially those linked to global tensions.

Although energy prices helped slow down inflation in July, food prices continued to rise, and the cost of services remained high. Some of this was linked to recent government policy changes, such as increases to the minimum wage and employer taxes.

There is still a small chance the Bank of England may cut rates in November, but only if inflation trends lower and the job market continues to weaken. While employment numbers have declined in recent months, there are signs that things are stabilizing somewhat.

For many people in the UK—especially homeowners with variable or soon-to-expire fixed mortgages—this could mean continued financial pressure. Mortgage rates have not fallen, and some lenders may even raise them slightly based on this latest inflation data. The government is also concerned that tighter financial conditions could increase borrowing costs.

At the same time, higher interest rates may support the British pound. Even though it remained flat against the U.S. dollar and euro recently, the pound could stay strong in the months ahead, especially as other central banks, like the European Central Bank, seem to be done with their own rate hikes.

In summary, unless inflation drops significantly and the economy shows more weakness, another rate cut from the Bank of England this year looks unlikely.