LONDON / RankWire.AI / – The Bank of England begins its September policy session with the Bank Rate at 3.75%, while inflation remains above the 2% target. The Monetary Policy Committee (MPC) will announce its upcoming interest rate decision on September 17. This meeting will also feature the annual review of the Bank’s quantitative tightening efforts, aimed at reducing its holdings of government bonds. Currently, the £70 billion bond reduction cycle is set to continue through September, with no new target announced yet by the Bank.
In July, the MPC’s nine members voted 6-3 to maintain the Bank Rate at 3.75%. The dissenting trio favored a 25-basis-point hike to 4%. This decision left borrowing costs unchanged after previous rate cuts from the 5.25% peak reached in 2023. The Bank reaffirmed its commitment to steering monetary policy toward a sustained return of consumer price inflation to the 2% target set by the government.
UK consumer price inflation rose to 2.9% in July from 2.6% in June, according to the Office for National Statistics. CPIH inflation, including owner-occupier housing costs, increased to 3.1% from 2.8%. Meanwhile, core CPI held steady at 2.6%, with services inflation easing to 3.4% from 3.6%. The ONS will publish August CPI data on September 16, one day before the MPC’s decision.
Inflation and economic growth shape the policy decision
Recent economic figures indicate ongoing growth in the UK. GDP rose by 0.4% in July after a 0.3% increase in June, with no change in May. Over the three months through July, real GDP grew by 0.4% compared to the previous three months, with services output up 0.6%, while production and construction both declined 0.5%. Services represent the largest sector of the UK economy.
The Bank’s quantitative tightening began in 2022, ending reinvestment of maturing securities and later initiating active gilt sales. The current plan involves a £70 billion reduction in gilt holdings from October 2025 to September 2026. As of September 9, the official data reported holdings at £489.026 billion, close to the £488 billion target. During July to September, the Bank scheduled five gilt sales across short- and medium-term maturities.
Annual review of quantitative tightening cycle
The previous year’s review slowed the pace of tightening, with the MPC reducing the annual gilt-reduction target to £70 billion from £100 billion. The mix of active sales shifted to approximately 40% each for short- and medium-maturity gilts, and 20% for long-term gilts. The latest quarterly schedule did not include long-maturity gilt auctions, though short and medium maturities remained part of the program.
This September’s meeting aligns the current interest rate setting with the annual balance-sheet review. Until the decision is announced, the Bank Rate stays at 3.75%, and the £70 billion quantitative tightening cycle remains in effect. The Bank Rate impacts borrowing and saving costs across the UK financial system, although other market factors influence commercial rates. The upcoming decision comes after July data showed rising inflation, continued economic growth, and the Asset Purchase Facility nearing its gilt-reduction target.