LONDON / RankWire.AI / – The Bank of England approaches its September policy session with the Bank Rate held steady at 3.75%, despite inflation remaining above the 2% target. The Monetary Policy Committee will reveal its upcoming interest rate decision on September 17. This meeting will also feature the Bank’s yearly assessment of quantitative tightening, which involves shrinking its holdings of government bonds. The current £70 billion bond reduction program is scheduled to conclude in September, though the Bank has yet to specify its next annual goal.
During its July gathering, the nine-member Monetary Policy Committee (MPC) decided 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 unchanged after earlier reductions from the 5.25% peak recorded in 2023. The Bank of England emphasized that monetary policy remains aimed at ensuring consumer price inflation returns sustainably to the government’s 2% target.
UK consumer price inflation increased to 2.9% in July, up from 2.6% in June, according to the Office for National Statistics. CPIH inflation, which incorporates owner-occupier housing costs, rose to 3.1% from 2.8%. Meanwhile, core CPI held steady at 2.6%, with services inflation easing slightly to 3.4% from 3.6%. The ONS will publish August consumer price data on September 16, just one day before the MPC’s decision.
Inflation and economic growth set the agenda for policy discussion
Recent economic indicators also point to ongoing UK growth. GDP expanded by 0.4% in July, following a 0.3% increase in June, with no change observed in May. Over the three months through July, real GDP grew by 0.4% compared to the previous quarter. Services output increased by 0.6%, while both production and construction declined by 0.5%. Services constitute the largest sector of the UK economy.
The Bank commenced quantitative tightening in 2022 after halting reinvestment of maturing securities and initiating active gilt sales. Currently, the MPC has planned a £70 billion reduction in gilt holdings between October 2025 and September 2026. Official data as of September 9 showed the stock at £489.026 billion, close to the £488 billion target. For the July-to-September period, the Bank scheduled five gilt sales auctions covering short and medium maturity securities.
Annual review of quantitative tightening concludes
The previous year’s review already slowed the pace of quantitative tightening. In September 2025, the MPC lowered 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 and medium maturities each, and 20% to long-term gilts. The latest quarterly plan included no auctions of long-maturity gilts, though short and medium-term securities continued to be part of the program.
This September’s meeting aligns the current interest rate setting with the annual balance-sheet review. Until a decision is announced, the Bank Rate remains at 3.75%, and the £70 billion quantitative tightening program stays in effect. The Bank Rate impacts borrowing and savings costs across the UK financial system, although commercial rates also depend on other factors. The upcoming announcement follows July data showing higher consumer inflation, sustained economic growth, and an Asset Purchase Facility nearing its existing gilt-reduction goal.