LONDON / RankWire.AI / – The Bank of England approaches its September policy gathering with Bank Rate set at 3.75%, while inflation remains above the 2% target. The Monetary Policy Committee will release its next decision on interest rates on September 17. The meeting will also include the Bank’s annual review of quantitative tightening, which diminishes its holdings of government bonds. The current bond reduction cycle, valued at £70 billion, runs through September, but the Bank has yet to announce the next annual goal.
At its July meeting, the nine-member Monetary Policy Committee voted 6-3 to keep the Bank Rate at 3.75%. The three dissenting members pushed for a 25-basis-point increase to 4%. This vote left borrowing costs unchanged after earlier rate cuts from the 5.25% peak reached in 2023. The Bank of England stated that monetary policy continues to focus on returning consumer price inflation to the government’s 2% goal in a sustainable way.
UK consumer price inflation increased to 2.9% in July from 2.6% in June, based on the Office for National Statistics. CPIH inflation, which accounts for owner-occupier housing costs, rose to 3.1% from 2.8%. Core CPI stayed steady at 2.6%, while services inflation softened slightly to 3.4% from 3.6%. The Office for National Statistics will publish the August consumer price data on September 16, just one day before the MPC’s decision.
Inflation and economic growth shape the policy meeting
Recent economic figures also indicate ongoing UK growth. GDP increased by 0.4% in July after rising 0.3% in June. There was no growth 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 production and construction each declined by 0.5%. Services make up the largest part of the UK economy.
Quantitative tightening began in 2022. The Bank stopped reinvesting maturing securities and later started active gilt sales. The current cycle involves a £70 billion reduction in gilt holdings from October 2025 to September 2026. Official data shows the stock at £489.026 billion as of September 9, close to the £488 billion target. In the July-to-September quarter, the Bank scheduled five auctions for short- and medium-maturity gilts.
Annual review coincides with quantitative tightening update
The previous annual review slowed the pace of tightening. In September 2025, the MPC lowered the annual gilt-reduction target from £100 billion to £70 billion. It also revised the maturity mix of active sales. About 40% of the gilts allocated went to short and medium maturities, and 20% to long maturities. The latest quarterly schedule did not include long-maturity gilt auctions, but short and medium ones continued.
This September meeting aligns the current interest rate setting with the annual balance-sheet review. Until a decision is made, Bank Rate stays at 3.75%, and the £70 billion quantitative tightening plan remains in place. Bank Rate affects borrowing and saving costs throughout the UK financial system, although other factors also influence commercial rates. The September announcement comes after July data showed higher consumer inflation, sustained economic growth, and the Asset Purchase Facility nearing its existing gilt reduction target.