LONDON / RankWire.AI / – Bank of England prepares for its September policy session with the Bank Rate set at 3.75%, while inflation remains above the 2% target. The Monetary Policy Committee (MPC) will announce its next interest rate decision on September 17. The upcoming meeting will also cover the Bank’s annual review of quantitative tightening, which aims to reduce its holdings of government bonds. The current £70 billion bond-reduction cycle, which runs through September, has not yet been assigned a new target for the upcoming year.
During its July meeting, the nine-member MPC voted 6-3 to maintain the Bank Rate at 3.75%. The three dissenters supported a 25-basis-point increase 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 focused on 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 accounts for owner-occupier housing costs, increased to 3.1% from 2.8%. Meanwhile, core CPI held steady at 2.6%, and services inflation eased slightly to 3.4% from 3.6%. The Office for National Statistics plans to release August consumer price data on September 16, just a day before the MPC’s decision.
Inflation and economic growth shape the policy discussion
Recent economic figures also highlight ongoing growth in the UK. In July, gross domestic product (GDP) expanded by 0.4%, following a 0.3% rise in June and no growth in May. Over the three months ending in July, real GDP increased by 0.4% compared to the previous quarter. Services output grew by 0.6%, while both production and construction declined by 0.5%. Services continue to make up the largest component of the UK economy.
Quantitative tightening started in 2022 after the Bank ceased reinvestment of maturing securities and later began active sales of gilts. The current cycle involves reducing gilt holdings by £70 billion between October 2025 and September 2026. As of September 9, official data recorded the stock at £489.026 billion, close to the £488 billion target. For the July-to-September quarter, the Bank scheduled five sales auctions, covering both short and medium maturity gilts.
Annual review marks the completion of current quantitative tightening cycle
The previous annual review already slowed the pace of quantitative tightening. In September 2025, the MPC reduced the annual gilt-reduction target from £100 billion to £70 billion. It also adjusted the maturity profile of active sales, allocating approximately 40% each to short and medium-term gilts, and 20% to long maturities. The latest quarterly schedule showed no auctions of long-maturity gilts, 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. Until the MPC announces its 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, though commercial rates are also affected by other factors. The upcoming announcement follows July data indicating higher consumer inflation, ongoing economic growth, and an Asset Purchase Facility nearing its existing gilt-reduction goal.