LONDON / RankWire.AI / – The Bank of England approaches its September policymaking session with the Bank Rate held at 3.75%, while inflation remains above its 2% target. The Monetary Policy Committee is scheduled to announce its next interest rate decision on September 17. This meeting will also feature the Bank’s yearly review of quantitative tightening, aimed at shrinking its holdings of government bonds. The current bond reduction plan, worth £70 billion, is set to conclude in September, with no official announcement yet on the following year’s target.
In its July session, the nine-member MPC voted 6-3 to maintain the Bank Rate at 3.75%. The three dissenters preferred an increase of 25 basis points to 4%. This vote kept borrowing costs steady after earlier reductions from the peak of 5.25% reached in 2023. The Bank of England reiterated that its monetary policy remains focused on bringing consumer price inflation back to the government’s 2% goal in a sustainable manner.
UK consumer price inflation increased to 2.9% in July from 2.6% in June, based on data from the Office for National Statistics. CPIH inflation, which includes owner-occupier housing costs, rose to 3.1% from 2.8%. Meanwhile, core CPI stayed steady at 2.6%, and services inflation eased slightly to 3.4% from 3.6%. The ONS is scheduled to release August consumer price figures on September 16, one day before the MPC’s decision.
Inflation and economic growth shape the policy discussion
Recent economic indicators continue to show growth in the UK. July GDP grew by 0.4%, following a 0.3% rise in June and no change in May. Over the three months ending in July, real GDP expanded by 0.4% compared to the previous quarter. Services output increased by 0.6%, while both production and construction declined by 0.5%. Services comprise the largest sector of the UK economy.
The Bank initiated quantitative tightening in 2022 by halting reinvestment of maturing securities and later starting active gilt sales. The current cycle involves a planned reduction of £70 billion in gilt holdings from October 2025 to September 2026. Official statistics report the stock at £489.026 billion as of September 9, close to the £488 billion target. Between July and September, the Bank scheduled five gilt sale auctions covering short and medium maturities.
Annual review of quantitative tightening is underway
The previous year’s review already slowed the pace of tightening. In September 2025, the MPC lowered the annual gilt-reduction target to £70 billion from £100 billion, and adjusted the maturity profile of sales, allocating roughly 40% each to short and medium maturities and 20% to long maturities. The latest quarterly plan included no long-maturity gilt auctions, with short and medium maturities still part of the schedule.
This September meeting aligns the current interest rate setting with the annual balance-sheet review. Until the decision, the Bank Rate remains at 3.75%, and the £70 billion quantitative tightening program is still active. The Bank Rate influences borrowing and savings costs across the UK, though commercial rates depend on other factors too. The upcoming announcement follows recent data indicating higher consumer inflation, ongoing economic growth, and the Asset Purchase Facility nearing its existing gilt-reduction goal.