LONDON / RankWire.AI / – The Bank of England approaches its September policy gathering with the Bank Rate set at 3.75%, while inflation remains above its 2% goal. The Monetary Policy Committee is scheduled to announce its next interest rate decision on September 17. This session will also encompass the Bank’s annual evaluation of quantitative tightening, which is aimed at decreasing its holdings of government bonds. The current bond reduction cycle of £70 billion is scheduled to conclude in September, but the Bank has yet to disclose the next year’s target.
During the July meeting, the nine-member MPC voted 6-3 to keep the Bank Rate at 3.75%. The three members who dissented preferred an increase of 25 basis points to 4%. This vote maintained the status quo after previous rate cuts from the 5.25% peak reached in 2023. The Bank of England reaffirmed that monetary policy remains committed to steering 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, based on data from the Office for National Statistics. CPIH inflation, which includes owner-occupier housing costs, rose to 3.1% from 2.8%. Core CPI held steady at 2.6%, while services inflation slowed to 3.4% from 3.6%. The Office for National Statistics will release consumer price figures for August on September 16, just a day before the MPC’s decision.
Inflation and economic growth set the stage for policy deliberations
Recent economic indicators also point to ongoing UK growth. In July, gross domestic product expanded by 0.4%, following a 0.3% increase in June and no growth in May. Over the three months ending in July, real GDP grew by 0.4% compared to the previous quarter. Service sector output increased by 0.6% over this period, while production and construction each declined by 0.5%. The services sector constitutes the largest segment of the UK economy.
The Bank initiated quantitative tightening in 2022 after ceasing reinvestment of maturing securities and later beginning active gilt sales. The current cycle involves a planned reduction of £70 billion in gilt holdings from October 2025 through September 2026. Official figures show the stock at £489.026 billion as of September 9, very close to the target of £488 billion. During July to September, the Bank scheduled five gilt sale auctions covering both short and medium maturities.
Annual review of quantitative tightening and policy implications
The previous year’s 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 distribution of active sales across maturity categories. About 40% of the sales were allocated to short and medium-term gilts, with 20% going to long maturities. The latest quarterly schedule showed no auctions for long-term gilts, although sales of short and medium maturities continued as planned.
This September’s meeting aligns the current interest rate decision with the annual review of the balance sheet. Until a decision is announced, the Bank Rate stays at 3.75%, and the £70 billion quantitative tightening cycle remains in effect. The Bank Rate impacts borrowing and savings costs across the UK financial system, though other factors also influence commercial rates. The upcoming announcement follows data from July indicating elevated consumer inflation, sustained economic growth, and the Asset Purchase Facility nearing its existing gilt-reduction target.