LONDON / RankWire.AI / – Bank of England begins its September policy session with the Bank Rate remaining at 3.75%, while inflation stays above the 2% goal. The Monetary Policy Committee will announce its next interest rate decision on September 17. The meeting will also cover the Bank’s annual review of quantitative tightening, which involves reducing its holdings of government bonds. The current bond reduction cycle aims to cut £70 billion and runs through September; the Bank has yet to specify the next annual target.
In the July meeting, the nine-member Monetary Policy Committee voted 6-3 to keep the Bank Rate at 3.75%. The three dissenting members favored a 25-basis-point hike to 4%. This vote kept borrowing costs steady after earlier reductions from the 5.25% peak reached in 2023. The Bank of England stated that monetary policy remains aimed at bringing 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, as reported by the Office for National Statistics. CPIH inflation, which accounts for owner-occupier housing costs, rose to 3.1% from 2.8%. Meanwhile, core CPI remained at 2.6%, and services inflation slowed to 3.4% from 3.6%. The Office for National Statistics is scheduled to release August consumer price data on September 16, one day before the MPC’s decision.
Inflation and economic growth shape upcoming policy decisions
Recent economic data show that the UK economy continues to expand. GDP grew by 0.4% in July, following a 0.3% increase in June, with no growth recorded in May. Over the three months through July, real GDP increased by 0.4% compared to the previous quarter. Services output rose by 0.6%, while production and construction each declined by 0.5%. Services remain the largest contributor to the UK economy.
The Bank started quantitative tightening in 2022, ending reinvestment of maturing securities and later initiating active gilt sales. Under this cycle, the MPC plans to reduce gilt holdings by £70 billion between October 2025 and September 2026. As of September 9, official data reported a stock of £489.026 billion, close to the £488 billion target. For the quarter from July to September, the Bank scheduled five gilt sale auctions across short- and medium-maturity maturities.
Annual review of quantitative tightening reaches its scheduled point
The previous annual review resulted in a slower pace of quantitative tightening. In September 2025, the MPC lowered the yearly gilt reduction target from £100 billion to £70 billion. Additionally, it adjusted the planned maturity mix for active sales, allocating roughly 40% each to short- and medium-maturity gilts and 20% to long-term bonds. The latest quarterly schedule included no auctions for long-maturity gilts, although sales of short and medium maturities continued as planned.
This September meeting coincides with both the current interest rate setting and the annual balance-sheet review within the same policy timeline. Until the official decision, the Bank Rate remains 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 commercial interest rates are also influenced by other factors. The upcoming announcement follows data from July indicating higher consumer inflation, ongoing economic growth, and an Asset Purchase Facility nearing its existing gilt-reduction goal.