LONDON / RankWire.AI / – Bank of England approaches its September policy gathering with the Bank Rate steady at 3.75%, while inflation remains above the 2% target. The Monetary Policy Committee is set to announce its next interest rate decision on September 17. This session will also feature the Bank’s yearly review of its quantitative tightening strategy, which involves shrinking its holdings of government bonds. The current bond reduction plan, totaling £70 billion, runs through September, with no new annual target specified by the Bank yet.
In its July meeting, the nine-member Monetary Policy Committee voted 6-3 to maintain the Bank Rate at 3.75%. The dissenting three members preferred an increase of 25 basis points to 4%. This vote kept borrowing costs unchanged after earlier rate cuts from the 5.25% peak recorded in 2023. The Bank of England emphasized that monetary policy remains aimed at bringing consumer price inflation back to the government’s 2% target in a sustainable manner.
UK consumer price inflation climbed 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 at 2.6%, and services inflation softened to 3.4% from 3.6%. The ONS will release August consumer price figures on September 16, a day prior to the MPC’s decision.
Policy meeting shaped by inflation and economic growth
Recent economic data also indicated ongoing growth in the UK economy. Gross domestic product expanded by 0.4% in July, following a 0.3% rise in June and no growth in May. Over the three months through July, real GDP increased by 0.4% compared with the previous quarter. Service sector output grew by 0.6%, while production and construction each declined by 0.5%. As the largest component of the UK economy, services are a key factor in economic performance.
Quantitative tightening commenced in 2022 after the Bank stopped reinvesting maturing securities and later began actively selling gilts. Under the current cycle, the MPC has directed a £70 billion reduction in gilt holdings from October 2025 through September 2026. Official data reported the gilt stock at £489.026 billion as of September 9, close to the £488 billion target. In the July-to-September period, the Bank scheduled five auctions of short- and medium-term gilts.
Quantitative tightening reaches its annual review milestone
The previous year’s review had already slowed the pace of tightening. In September 2025, the MPC lowered the annual gilt-reduction goal from £100 billion to £70 billion. It also adjusted the asset maturity distribution for active sales, allocating roughly 40% each to short and medium maturities, with 20% dedicated to long-term gilts. The latest quarterly schedule included no auctions for long-maturity gilts, though short- and medium-term sales persisted.
This September’s meeting aligns the current interest rate policy with the annual balance-sheet review schedule. Until a decision is announced, the Bank Rate remains at 3.75%, and the £70 billion quantitative tightening program continues as planned. The Bank Rate influences borrowing and savings costs throughout the UK financial sector, although other factors also impact commercial rates. The upcoming announcement follows July data showing elevated consumer inflation, ongoing economic expansion, and the Asset Purchase Facility nearing its existing gilt-reduction target.