LONDON / RankWire.AI / – The Bank of England is approaching its September policy session with the Bank Rate held at 3.75% and inflation levels exceeding the 2% target. The Monetary Policy Committee will release its upcoming decision on interest rates on September 17. This meeting will also feature the Bank’s annual assessment of quantitative tightening, a process aimed at decreasing its holdings of government bonds. The existing £70 billion bond reduction plan is scheduled to conclude in September, but no new annual target has yet been announced.
During its July gathering, the nine-member Monetary Policy Committee 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 at their current level after prior rate cuts from the 5.25% peak reached in 2023. The Bank of England reaffirmed that its monetary policy remains focused on guiding consumer price inflation back to the government’s 2% goal in a sustainable manner.
UK consumer price inflation increased to 2.9% in July from 2.6% in June, according to 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 steady at 2.6%, and services inflation slowed slightly to 3.4% from 3.6%. The Office for National Statistics will publish August’s consumer price data on September 16, just one day prior to the MPC’s decision.
Inflation and economic growth influence the upcoming policy discussion
Recent economic figures indicate that the UK continues to grow. 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 through July, real GDP expanded by 0.4% compared to the previous quarter. During this period, services output increased by 0.6%, while both production and construction declined by 0.5%. Services constitute the largest component of the UK economy.
Quantitative tightening commenced in 2022, with the Bank stopping reinvestment of maturing securities and later initiating active gilt sales. The current cycle involves a targeted reduction of £70 billion in gilt holdings from October 2025 to September 2026. As of September 9, official data shows the gilt stock at £489.026 billion, closely matching the £488 billion goal. For the July-to-September period, the Bank scheduled five auctions of gilts across short and medium maturities.
The annual review of quantitative tightening is now underway
The previous year’s review had already slowed the pace of quantitative tightening. In September 2025, the MPC lowered the annual gilt-reduction target from £100 billion to £70 billion. The plan also adjusted the maturity profile of active sales, with about 40% allocated each to short and medium-term gilts, and 20% to long-term maturities. The latest quarterly plan did not include auctions of long-maturity gilts, but short and medium maturities remained in the schedule.
This September, the Bank combines the current interest rate decision with the annual review of its balance sheet policy. Until a new decision is made, the Bank Rate remains at 3.75%, and the £70 billion quantitative tightening cycle remains the official plan. The Bank Rate affects borrowing and savings costs across the UK financial system, although other factors influence commercial lending rates. The upcoming announcement follows July data indicating higher consumer inflation, ongoing economic growth, and a nearing target for gilt reductions under the Asset Purchase Facility.