LONDON / RankWire.AI / – Bank of England approaches its September policy session with the Bank Rate set at 3.75%, amid inflation rates exceeding the 2% goal. The Monetary Policy Committee is scheduled to release its next interest rate decision on September 17. During this gathering, the Bank will also conduct its annual review of quantitative tightening, a process aimed at shrinking its holdings of government bonds. The current bond reduction plan, involving a £70 billion decrease, runs through September, though the Bank has yet to specify the next year’s target.
In July, the nine-member MPC voted 6-3 to maintain the Bank Rate at 3.75%, with the dissenters favoring an increase of 25 basis points to 4%. This vote kept borrowing costs steady after previous rate cuts from the peak of 5.25% reached in 2023. The Bank of England emphasized that its monetary policy remains geared toward restoring consumer price inflation 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, according to the Office for National Statistics. The CPIH measure, which includes owner-occupier housing costs, rose to 3.1% from 2.8%. Meanwhile, core CPI held steady at 2.6%, and services inflation eased to 3.4% from 3.6%. The ONS will release the August consumer price data on September 16, a day before the MPC’s decision.
Inflation and economic growth shape the policy considerations
Economic indicators from recent data point to ongoing UK expansion. In July, gross domestic product increased by 0.4%, following a 0.3% rise in June, after no growth recorded in May. Over the three months ending in July, real GDP also grew by 0.4% compared to the previous quarter. During this period, services output increased by 0.6%, while production and construction each declined by 0.5%. Services remain the largest sector within the UK economy.
Since 2022, the Bank has been executing quantitative tightening, ending reinvestment of maturing securities and later initiating active gilt sales. As part of the current plan, the MPC scheduled a £70 billion reduction in gilt holdings from October 2025 through September 2026. Official figures show the stock at £489.026 billion as of September 9, just below the £488 billion target. For the quarter spanning July to September, the Bank planned five auctions of gilts across short and medium maturities.
Annual review coincides with quantitative tightening review
Last year’s review had already slowed the pace of quantitative tightening. In September 2025, the MPC reduced the annual gilt reduction target from £100 billion to £70 billion. The composition of active gilt sales was also adjusted, with about 40% allocated to short maturities, another 40% to medium, and 20% to long maturities. The latest quarterly schedule did not include long-maturity gilt auctions, though 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 the official announcement, the Bank Rate remains at 3.75%, and the £70 billion quantitative tightening cycle remains in effect. While Bank Rate influences borrowing and saving costs throughout the UK financial system, other factors also impact commercial rates. The upcoming decision follows July’s data indicating rising consumer inflation, ongoing economic growth, and the Asset Purchase Facility nearing its existing gilt reduction target.