LONDON / RankWire.AI / – The Bank of England approaches its September policy session with the Bank Rate steady at 3.75%, amid inflation still above its 2% goal. The Monetary Policy Committee is scheduled to announce its next interest rate decision on September 17. Additionally, the meeting will include the Bank’s yearly assessment of quantitative tightening, which aims to decrease its holdings of government bonds. Currently, the £70 billion bond-reduction cycle is set to conclude in September, with no official announcement yet made regarding the upcoming annual target.
In July, the nine-member Monetary Policy Committee voted 6-3 to maintain the Bank Rate at 3.75%. Those three dissenters favored a 25-basis-point hike to 4%. This vote left borrowing costs unchanged, following earlier rate cuts from the 5.25% peak reached in 2023. The Bank of England reiterated that its monetary policy remains dedicated to bringing consumer price inflation back to the government’s 2% target in a sustainable manner.
UK consumer price inflation reached 2.9% in July, up from 2.6% in June, according to the Office for National Statistics. CPIH inflation, which accounts for owner-occupier housing costs, increased to 3.1% from 2.8%. Meanwhile, core CPI held steady at 2.6%, while services inflation eased slightly to 3.4% from 3.6%. The Office for National Statistics will release August’s consumer price data on September 16, just a day before the MPC’s decision.
Policy Meeting Shaped by Inflation and Economic Growth
Recent economic figures also indicated ongoing UK expansion. Gross domestic product grew by 0.4% in July, following a 0.3% rise in June, with no change reported in May. Over the three months ending in July, real GDP increased by 0.4% compared to the previous quarter. Services output experienced a 0.6% rise during that period, whereas both production and construction saw declines of 0.5%. Services constitute the largest segment of the UK economy.
Quantitative tightening started in 2022 after the Bank ceased reinvesting maturing securities and later began actively selling gilts. 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, very close to the £488 billion target. For the July-September quarter, the Bank scheduled five sales auctions across short and medium maturity gilts.
Annual Review of Quantitative Tightening in Progress
The previous yearly review already slowed the pace of quantitative tightening. In September 2025, the MPC lowered the annual gilt-reduction goal from £100 billion to £70 billion. Changes were also made to the maturity profile of active sales, with approximately 40% allocated to short and medium maturities each, and 20% to long-term gilts. The latest quarterly schedule did not include any long-maturity gilt auctions, although short and medium maturities remained part of the plan.
This September meeting aligns the current interest rate setting with the annual balance-sheet review within the same policy framework. Until the formal decision, the Bank Rate stays at 3.75%, and the £70 billion quantitative tightening program remains in effect. The Bank Rate influences borrowing and savings costs across the UK financial system, although commercial rates are affected by other factors too. The upcoming announcement comes after July data indicated higher consumer inflation, ongoing economic growth, and an Asset Purchase Facility nearing its existing gilt-reduction target.