EconoTicker

The Bank of England's Monetary Policy Committee (MPC) voted 6-3 to keep interest rates unchanged at 4.25%, with three members favoring a 0.25% cut to 4%.

Key takeaways:

• Rates held steady as inflation concerns persist
• Split vote signals debate over timing of cuts
• Future moves remain data-dependent

The BoE continues balancing inflation control with economic growth risks. Markets now watch for signals on when easing might begin.

London—The UK’s House Price Index rose 3.5% year-on-year in the latest reading, down from 6.4% in the prior month and below the 5.6% forecast. The marked slowdown reflects weakening buyer demand amid higher borrowing costs and economic uncertainty.

At 09:00 BST, the UK’s Office for National Statistics released May inflation data showing subdued price pressures:

• Core CPI (MoM) rose 0.2%, matching forecasts and down sharply from April’s 1.4%.
• Core CPI (YoY) held at 3.5%, in line with expectations and easing from 3.8% in April.
• Headline CPI (MoM) also ticked up 0.2%, in line with consensus and down from 1.2% the month before.
• Headline CPI (YoY) cooled to 3.4% versus 3.3% forecast and 3.5% prior.
• Core RPI (YoY) fell to 4.1% (from 4.2%), while Core RPI (MoM) was just 0.2%, down from 1.8%.
• The Retail Price Index slowed to 0.2% MoM and 4.3% YoY, both below last month’s 1.7% and 4.5%, respectively.

Overall, the data suggest that headline and underlying inflation pressures are continuing to moderate, reinforcing the view that Bank of England rate hikes may be on hold.

At the latest 5-year Treasury gilt auction, the stop-out yield climbed to 4.060% (previous: 3.977%), reflecting increased mid-term borrowing costs and softer demand for UK government debt.

The Rightmove House Price Index in the UK fell 0.3% month-on-month in June (May: +0.6%), marking the first monthly decline in recent readings. Year-on-year, prices rose 0.8% in June (down from 1.2% in May), underscoring a significant slowdown in annual house price growth.

UK industrial production fell 0.6% month-on-month in April (forecast: –0.4%; March: –0.7%), marking a deeper contraction than expected. Year-on-year output declined 0.3% (forecast: –0.2%; March: –0.7%). Manufacturing production slid 0.9% MoM (forecast: –0.8%; March: –0.8%) but remained 0.4% higher than a year ago (March: –0.8%). Meanwhile, the index of services rose 0.6% MoM (forecast: 0.7%; March: 0.7%), highlighting resilience in the service sector.

The UK economy contracted 0.3% month-on-month in April (forecast: –0.1%; March: +0.2%), marking its first monthly decline in 2025. Annual GDP growth slowed to 0.9% in April (March: 1.1%). The three-month-on-three-month GDP change remained steady at 0.7%. Meanwhile, the trade deficit widened to £23.21 billion (forecast: £20.80 billion; March: £19.87 billion), with the non-EU shortfall at £8.65 billion (March: £6.83 billion).

Average earnings excluding bonuses in the UK rose 5.2% year-on-year in April (forecast: 5.4%; March: 5.5%), while total earnings including bonuses grew 5.3% (forecast: 5.5%; March: 5.6%). Claimant count jumped by 33.1K in May (forecast: 9.5K; April: –21.2K). Net employment over the three months to April increased by 89K (March: 112K), and the unemployment rate held at 4.6% in April (March: 4.5%).

The average UK mortgage rate in May fell to 7.09% (April: 7.19%), marking a slight decrease in borrowing costs.

The Halifax House Price Index showed a year-on-year increase of 2.5% in May (April: 3.2%), highlighting further deceleration in UK home price growth. Month-on-month, prices fell by 0.4% in May (April: +0.3%), signaling ongoing cooling in the housing market.

The S&P Global Construction PMI for the UK in May rose to 47.9 (forecast: 47.4; April: 46.6), but remained below the 50 threshold, indicating the construction sector is still contracting—albeit at a slower rate.

The S&P Global Composite PMI for the UK in May climbed to 50.3 (forecast: 49.4; April: 48.5), marking a return to growth in overall economic activity. The S&P Global Services PMI also accelerated to 50.9 (forecast: 50.2; April: 49.0), underlining robust expansion in the service sector.