LONDON / RankWire.AI / – Ahead of its September policy gathering, the Bank of England maintains the Bank Rate at 3.75%, with inflation exceeding the official 2% target. The Monetary Policy Committee (MPC) is set to announce its upcoming interest rate decision on September 17. This meeting will also feature the Bank’s yearly review of quantitative tightening, which involves diminishing its holdings of government bonds. The current bond reduction phase, valued at £70 billion, is scheduled to conclude in September, though the Bank has yet to specify the next annual objective.
During the July session, nine MPC members voted 6-3 to keep the Bank Rate steady at 3.75%. The three dissenters favored a 25-basis-point hike, raising it to 4%. This decision left borrowing costs unchanged after previous cuts from the 5.25% peak recorded in 2023. The Bank of England reiterated its commitment to a monetary policy aimed at bringing consumer price inflation back to the government’s 2% goal in a sustainable manner.
UK consumer price inflation climbed to 2.9% in July from 2.6% in June, based on figures from the Office for National Statistics. CPIH inflation, which incorporates owner-occupier housing costs, increased to 3.1% from 2.8%. Core CPI remained at 2.6%, while inflation in services slowed to 3.4% from 3.6%. The ONS is scheduled to release August consumer price data on September 16, just one day prior to the MPC’s decision.
Inflation and economic growth influence the policy deliberations
Recent economic indicators also pointed to continued growth within the UK. GDP grew by 0.4% in July after a 0.3% rise in June, with no change in May. Over the three months leading up to July, real GDP increased by 0.4% compared to the previous quarter. The services sector experienced a 0.6% expansion in this period, whereas production and construction both contracted by 0.5%. Services constitute the largest segment of the UK economy.
In 2022, the Bank of England commenced quantitative tightening following the cessation of reinvestment of maturing securities and subsequent active gilt sales. The current cycle involves a targeted reduction of £70 billion in gilt holdings from October 2025 through September 2026. As of September 9, official data show the stock at £489.026 billion, nearing the £488 billion goal. For the quarter from July to September, the Bank scheduled five auctions for short- and medium-maturity gilts.
Annual review of quantitative tightening is now underway
The previous yearly assessment already led to a slowdown in the pace of reduction. In September 2025, the MPC lowered the annual gilt-reduction target from £100 billion to £70 billion. Additionally, it revised the distribution of active sales, allocating approximately 40% each to short- and medium-maturity gilts, with 20% designated for long maturities. The latest quarterly schedule did not include auctions for long-term gilts, although sales of short- and medium-maturity gilts continued as planned.
This September meeting aligns the current interest rate decision with the annual balance-sheet review, both falling under the same policy timetable. Until an official announcement is made, the Bank Rate remains at 3.75%, and the £70 billion bond reduction program remains active. The Bank Rate significantly influences borrowing and savings costs across the UK financial system, even though commercial lending rates are also affected by other factors. The upcoming decision follows recent data from July indicating higher consumer inflation, ongoing economic growth, and an Asset Purchase Facility nearing its existing gilt-reduction target.