LONDON / RankWire.AI / – Bank of England approaches its September policy gathering with the Bank Rate set at 3.75%, amid inflation levels exceeding the 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 yearly review of quantitative tightening, which involves reducing its holdings of government bonds. The current bond-reduction cycle, valued at £70 billion, will conclude in September, with no new annual target announced yet.
In its July meeting, the nine members of the Monetary Policy Committee voted 6-3 to maintain the Bank Rate at 3.75%. The dissenting trio favored an increase of 25 basis points, raising the rate to 4%. This vote kept borrowing costs steady after previous cuts from the 5.25% peak reached in 2023. The Bank of England emphasized that its monetary policy remains aimed at bringing consumer price inflation back to the government’s 2% target in a sustainable manner.
UK consumer price inflation reached 2.9% in July, up from 2.6% in June, according to the Office for National Statistics. CPIH inflation, which accounts for owner-occupier housing costs, increased to 3.1% from 2.8%. Core CPI stayed at 2.6%, while inflation in services declined slightly to 3.4% from 3.6%. The Office for National Statistics is scheduled to release consumer price data for August on September 16, just one day before the MPC’s decision.
Inflation figures and economic growth influence the policy discussions
Recent economic indicators show continued growth within the UK. Gross domestic product expanded by 0.4% in July following a 0.3% increase in June, with no change in May. Over the three months ending in July, real GDP grew 0.4% compared to the previous three months. Services output increased by 0.6% during this period, while production and construction each declined by 0.5%. Services sector remains the largest component of the UK economy.
Since 2022, the Bank has been implementing quantitative tightening, ending reinvestment of maturing securities and initiating active gilt sales. Under the current plan, the MPC has directed a reduction of £70 billion in gilt holdings from October 2025 to September 2026. As of September 9, official data shows the stock at £489.026 billion, close to the £488 billion target. Between July and September, the Bank scheduled five sales auctions covering short and medium-term gilts.
Quantitative tightening’s annual review phase approaches
The previous yearly review resulted in a slower pace of quantitative tightening. In September 2025, the MPC lowered the annual gilt reduction target to £70 billion from £100 billion in the previous cycle, and adjusted the maturity distribution of active sales. The Bank allocated roughly 40% each to short and medium maturity gilts, with 20% to long maturities. The latest quarterly schedule omitted long-maturity gilt auctions, but short and medium maturities remained part of the program.
This September meeting aligns the current interest rate decision with the annual balance-sheet review. Until a formal decision is made, the Bank Rate stays at 3.75% and the £70 billion quantitative tightening cycle remains the active policy. The Bank Rate affects borrowing and savings costs across the UK financial system, though other factors influence commercial rates as well. The upcoming announcement follows July data indicating higher consumer inflation, ongoing economic growth, and the Asset Purchase Facility nearing its existing gilt-reduction target.