LONDON / RankWire.AI / – The Bank of England approaches its September policy session with the Bank Rate held steady at 3.75%, even as inflation remains above the government’s 2% target. The Monetary Policy Committee is set to announce its next interest rate decision on September 17. The meeting will also encompass the annual assessment of the Bank’s quantitative tightening program, which aims to shrink its holdings of government bonds. Currently, the bond-reduction cycle targeting £70 billion is scheduled to conclude in September, but the Bank has yet to specify the next annual goal.
In July, the nine-member MPC voted 6-3 to keep the Bank Rate at 3.75%. The three dissenters favored a 25-basis-point hike to 4%. This vote maintained borrowing costs after earlier reductions from the 5.25% peak reached in 2023. The Bank of England emphasized that its monetary policy remains aimed at restoring consumer price inflation to the 2% target in a sustainable manner.
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 includes owner-occupier housing costs, rose 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 will release August’s consumer price data on September 16, just one day before the MPC’s decision.
Inflation figures and economic growth shape the policy debate
Recent economic indicators also point to ongoing growth in the UK. In July, gross domestic product increased by 0.4%, following a 0.3% rise in June, with no growth recorded in May. Over the three months ending in July, real GDP grew by 0.4% compared to the previous quarter. Services output increased by 0.6%, while production and construction each declined by 0.5%. Services constitute the largest sector of the UK economy.
The Bank started its quantitative tightening process in 2022 after halting reinvestment of maturing securities, and later introduced active gilt sales. The current cycle involves a planned reduction of £70 billion in gilt holdings from October 2025 to September 2026. Official figures indicate the stock stood at £489.026 billion as of September 9, close to the £488 billion target. For the quarter from July to September, the Bank scheduled five gilt sale auctions across short and medium maturities.
Quantitative tightening reaches the annual review milestone
The previous year’s review already moderated the pace of quantitative tightening. In September 2025, the MPC reduced the annual gilt-reduction target from £100 billion to £70 billion. The review also adjusted the composition of active sales, allocating approximately 40% each to short and medium maturity gilts, with the remaining 20% to long maturities. The latest quarterly schedule did not include any auctions for long-maturity gilts, while short and medium maturities remained part of the program.
The September meeting aligns the current interest rate setting with the annual balance-sheet review, both on the same policy timetable. Until the decision, 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 throughout the UK financial system, though other market factors also influence commercial rates. Following July data showing rising consumer inflation, ongoing economic growth, and an Asset Purchase Facility nearing its gilt-reduction target, the upcoming announcement will be closely watched.
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