LONDON / RankWire.AI / – Bank of England approaches its September policymaking session with the Bank Rate held at 3.75%, while inflation remains above its 2% target. The upcoming meeting, scheduled for September 17, will see the Monetary Policy Committee release its latest interest rate decision. Additionally, the Bank’s annual review of quantitative tightening will be on the agenda, focusing on reducing its holdings of government bonds. The current bond reduction cycle, which is set at £70 billion, continues through September. The Bank has yet to specify the next annual target for bond sales.
During the July meeting, the nine-member Monetary Policy Committee voted 6-3 to maintain the Bank Rate at 3.75%. The three dissenting members favored an increase of 25 basis points, raising the rate to 4%. This vote left borrowing costs unchanged, following previous rate cuts from the 5.25% peak reached in 2023. The Bank of England emphasized that its monetary policy remains focused on 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, up from 2.6% in June, according to the Office for National Statistics. CPIH inflation, which includes owner-occupier housing costs, grew to 3.1% from 2.8%. The core CPI rate held steady at 2.6%, while inflation in services slowed slightly to 3.4% from 3.6%. The Office for National Statistics will release August consumer price figures on September 16, a day before the MPC’s decision.
Inflation Data and Economic Growth Shape the Policy Discussions
Recent economic indicators also point to ongoing UK growth. In July, gross domestic product expanded by 0.4%, following a 0.3% rise in June, with no change observed in May. Over the three months ending in July, real GDP grew by 0.4% compared with the previous quarter. Services output increased by 0.6% during this period, whereas production and construction both declined by 0.5%. Services continue to represent the largest sector within the UK economy.
Quantitative tightening by the Bank began in 2022 after it stopped reinvesting maturing securities and later started active gilt sales. Under the current cycle, the MPC has ordered a reduction of £70 billion in gilt holdings from October 2025 to September 2026. As of September 9, official data show the gilt stock at £489.026 billion, close to the target of £488 billion. The Bank’s schedule for the July-to-September quarter includes five auctions for short- and medium-maturity gilts.
The Annual Review of Quantitative Tightening Takes Center Stage
The previous annual review already slowed the pace of quantitative tightening. In September 2025, the MPC cut the annual gilt-reduction target from £100 billion to £70 billion. The plan also shifted the maturity profile of active sales, allocating roughly 40% each to short- and medium-maturity gilts, with 20% directed to long-term maturities. The latest quarterly schedule included no auctions for long-maturity gilts, while the focus remained on short and medium maturities.
This September meeting aligns the current interest rate setting with the annual balance-sheet review. Until a decision is announced, the Bank Rate stays at 3.75%, and the £70 billion quantitative tightening plan remains active. The Bank Rate affects borrowing and savings costs across the UK financial landscape, though other factors also influence commercial lending rates. The upcoming September statement comes after July data indicated higher consumer inflation, sustained economic growth, and the Asset Purchase Facility nearing its existing gilt-reduction goal.