LONDON / RankWire.AI / – As the Bank of England prepares for its September policy session, Bank Rate stands at 3.75%, with inflation still exceeding the 2% target. The Monetary Policy Committee will announce its upcoming interest rate decision on September 17. Additionally, the meeting will encompass the annual review of the Bank’s quantitative tightening program, which involves reducing its holdings of government bonds. The current bond reduction cycle, set at £70 billion, is scheduled to conclude in September, with no official announcement yet made regarding the next annual target.
In its July gathering, the nine-member Monetary Policy Committee voted 6-3 to maintain Bank Rate at 3.75%. The three dissenters favored an increase of 25 basis points to 4%. This decision kept borrowing costs steady following earlier rate cuts from the 5.25% peak reached in 2023. The Bank of England reaffirmed that its monetary policy remains aimed at bringing consumer price inflation back to the government’s 2% goal in a sustainable manner.
UK consumer price inflation reached 2.9% in July, up from 2.6% in June, according to the Office for National Statistics. CPIH inflation, which accounts for owner-occupier housing costs, increased to 3.1% from 2.8%. Core CPI remained at 2.6%, while inflation in services eased slightly to 3.4% from 3.6%. The Office for National Statistics is scheduled to publish August consumer price data on September 16, one day prior to the MPC’s decision.
Inflation trends and economic growth shape September’s policy discussion
Early this month, recent economic indicators demonstrated ongoing UK growth. In July, gross domestic product increased by 0.4%, following a 0.3% rise in June and no change in May. Over the three months ending in July, real GDP also expanded by 0.4% compared to the previous quarter. During that period, services output climbed 0.6%, whereas production and construction each contracted by 0.5%. Services continue to constitute the largest sector of the UK economy.
Since 2022, the Bank has been implementing quantitative tightening by halting reinvestment of maturing securities and, subsequently, actively selling gilts. Under the current plan, the MPC has ordered a reduction of £70 billion in gilt holdings between October 2025 and September 2026. As of September 9, official figures show the stock at £489.026 billion, close to the £488 billion target. For the July-to-September period, the Bank scheduled five gilt sales auctions covering both short and medium maturities.
Annual review of quantitative tightening is underway
Last September, the MPC already slowed the pace of quantitative tightening, lowering the annual gilt reduction target from £100 billion to £70 billion. The composition of active gilt sales was also adjusted, allocating roughly 40% each to short and medium maturity gilts, with 20% directed towards long-term maturities. Recent quarterly plans included no long-maturity gilt auctions, while short and medium maturities remained part of the schedule.
This September’s meeting aligns the current interest rate decision with the annual balance-sheet review. Until the official decision, Bank Rate stays at 3.75%, and the £70 billion quantitative tightening cycle remains in effect. Bank Rate impacts borrowing and savings costs across the UK’s financial system, although other market factors also influence commercial rates. The upcoming announcement follows July data indicating elevated consumer inflation, sustained economic growth, and an Asset Purchase Facility nearing its existing gilt-reduction goal.