LONDON / RankWire.AI / – The Bank of England begins its September policy session with the Bank Rate set at 3.75%, amid inflation rates exceeding the 2% target. The Monetary Policy Committee is scheduled to release its next interest rate decision on September 17. This gathering will also encompass the Bank’s yearly review of quantitative tightening, which involves shrinking its holdings of government bonds. The current bond-reduction program, amounting to £70 billion, is scheduled to continue through September, with the Bank having yet to announce the next annual goal.
At the July meeting, the nine-member MPC voted 6-3 to maintain the Bank Rate at 3.75%. The three dissenters favored a 25-basis-point hike to 4%. This vote kept borrowing costs steady after previous rate cuts from the 5.25% peak reached in 2023. The Bank of England emphasized that monetary policy remains aimed at restoring consumer price inflation to the government’s 2% target in a sustainable manner.
UK consumer price inflation rose to 2.9% in July from 2.6% in June, based on data from 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%, and services inflation decreased slightly to 3.4% from 3.6%. The ONS is expected to publish August’s consumer price figures on September 16, just a day before the MPC’s decision.
Inflation and economic growth shape the policy considerations
Latest economic indicators point to ongoing UK expansion. In July, gross domestic product grew by 0.4%, following a 0.3% increase in June and no growth in May. Over the three months ending in July, real GDP also expanded by 0.4% compared to the previous quarter. Services output rose 0.6% over this period, while production and construction each declined by 0.5%. Services remain the largest sector within the UK economy.
Quantitative tightening commenced in 2022 after the Bank stopped 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. As of September 9, official figures indicate the stock at £489.026 billion, close to the £488 billion target. During the July-to-September quarter, the Bank scheduled five gilt sales auctions covering short and medium maturities.
Quantitative tightening reaches its annual review milestone
Last year’s review resulted in a slowdown of the tightening pace. In September 2025, the MPC reduced the annual gilt-reduction target from £100 billion to £70 billion, adjusting the schedule of active sales accordingly. The Bank allocated roughly 40% of the sales to short-term gilts, another 40% to medium maturities, and the remaining 20% to long-term securities. The recent quarterly schedule showed no auctions of long-maturity gilts, while short and medium-term gilts remained part of the plan.
This September meeting coincides with both the current interest rate setting and the annual review of the balance sheet, aligning the two policies. Until a decision is announced, the Bank Rate stays at 3.75%, and the £70 billion quantitative tightening plan remains in effect. The Bank Rate plays a key role in influencing borrowing and savings costs across the UK financial system, although other factors also impact commercial rates. The upcoming announcement follows July’s data revealing increased consumer inflation, persistent economic growth, and an Asset Purchase Facility nearing its existing gilt-reduction goal.