LONDON / RankWire.AI / – The Bank of England begins its September policy session with the Bank Rate steady at 3.75%, despite inflation remaining above its 2% target. The Monetary Policy Committee (MPC) will reveal its next decision on interest rates on September 17. The meeting will also encompass the Bank’s yearly review of quantitative tightening, which involves reducing its holdings of government bonds. The current £70 billion bond reduction program is scheduled to conclude in September, though the Bank has yet to specify the next yearly target.
In the July gathering, the nine-member MPC voted 6-3 to maintain the Bank Rate at 3.75%. The three dissenters supported a 25-basis-point hike 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 its monetary policy continues to focus on bringing consumer price inflation back to the government’s 2% target in a sustainable manner.
UK consumer price inflation increased to 2.9% in July from 2.6% in June, according to the Office for National Statistics. CPIH inflation, which also accounts for owner-occupier housing costs, moved up to 3.1% from 2.8%. Core CPI held steady at 2.6%, while services inflation eased slightly to 3.4% from 3.6%. The ONS will release August consumer price data on September 16, just a day before the MPC’s interest rate decision.
Inflation figures and economic growth influence policy deliberations
Recent economic reports indicate ongoing growth in the UK. GDP expanded by 0.4% in July following a 0.3% rise in June, with no change recorded in May. Over the three months through July, real GDP also increased by 0.4% compared to the previous quarter. Services output grew by 0.6% during this period, while both production and construction saw declines of 0.5%. Since services constitute the largest segment of the UK economy, these figures are significant.
Quantitative tightening commenced in 2022 after the Bank ended reinvestment of maturing securities and later began actively selling gilts. Currently, the MPC has mandated a reduction of £70 billion in gilt holdings from October 2025 to September 2026. As of September 9, official data showed the stock at £489.026 billion, close to the £488 billion target. The scheduled sales for the July-to-September quarter include five auctions across short and medium-term gilts.
Annual review of quantitative tightening approaches
The previous year’s review resulted in a slowdown of the tightening process. In September 2025, the MPC lowered the annual gilt reduction target from £100 billion to £70 billion. The composition of active gilt sales was also revised, with approximately 40% allocated to short-term, another 40% to medium-term, and 20% to long-term gilts. The latest quarterly plan did not include auctions of long-maturity gilts, though short and medium maturities remained part of the schedule.
This September meeting aligns the current interest rate decision with the annual balance-sheet review. Until the MPC announces its decision, the Bank Rate stays at 3.75%, and the £70 billion quantitative tightening cycle remains in place. Bank Rate directly affects borrowing and saving costs throughout the UK financial system, though other factors also influence commercial rates. The upcoming announcement follows recent data indicating increased consumer inflation, continued economic expansion, and progress toward the existing gilt-reduction goals of the Asset Purchase Facility.
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