LONDON / RankWire.AI / – The Bank of England approaches its September policy session with the Bank Rate at 3.75% and inflation still exceeding the 2% target. The Monetary Policy Committee (MPC) is scheduled to announce its next interest rate decision on September 17. This meeting will also feature the Bank’s annual review of quantitative tightening, which entails reducing its holdings of government bonds. The current bond-reduction cycle, valued at £70 billion, is set to conclude in September, although the Bank has not yet disclosed the next target for its bond sale program.
During its July gathering, the nine-member MPC voted 6-3 to maintain the Bank Rate at 3.75%. The three dissenters favored an increase of 25 basis points to 4%. This vote left borrowing costs unchanged after prior rate cuts from the 5.25% peak observed in 2023. The Bank of England emphasized that monetary policy remains geared toward restoring consumer price inflation to the government’s 2% goal 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 factors in owner-occupier housing costs, increased to 3.1% from 2.8%. Core CPI remained steady at 2.6%, while inflation in services eased slightly to 3.4% from 3.6%. The Office for National Statistics is scheduled to release consumer price data for August on September 16, just a day before the MPC’s decision.
Inflation and economic growth shape the policy agenda
Recent economic indicators also point to ongoing UK growth. In July, gross domestic product increased by 0.4%, following a 0.3% rise in June and no change in May. Over the three months ending in July, real GDP grew by 0.4% compared to the previous three-month period. The output of services increased by 0.6%, while both production and construction declined by 0.5%. Services constitute the largest segment of the UK economy.
Since 2022, the Bank has implemented quantitative tightening after halting reinvestment of maturing securities and initiating active gilt sales. Under the current cycle, the MPC planned a reduction of gilt holdings worth £70 billion between October 2025 and September 2026. Official statistics reported the gilt stock at £489.026 billion as of September 9, aligning closely with the £488 billion target. During the July-to-September quarter, the Bank scheduled five gilt sale auctions covering both short and medium maturities.
Quantitative tightening reaches a key annual review point
The previous annual review resulted in a slowdown of the quantitative tightening pace. In September 2025, the MPC reduced the annual gilt-reduction target from £100 billion in the previous cycle to £70 billion. The Bank also adjusted its approach to the maturity profile of active gilt sales, allocating roughly 40% to short-maturity and medium-maturity gilts each, with 20% dedicated to long maturities. The latest quarterly plan included no auctions of long-maturity gilts, although the program continued to include short and medium maturities.
This September meeting aligns the current interest rate policy and the annual review of the balance sheet on the same schedule. Until a decision is announced, the Bank Rate remains at 3.75%, and the £70 billion quantitative tightening cycle is officially ongoing. The Bank Rate influences borrowing and saving costs throughout the UK financial system, though commercial rates are also affected by other factors. The upcoming announcement follows July data showing higher consumer inflation, ongoing economic growth, and the Asset Purchase Facility nearing its existing gilt-reduction target.
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