LONDON / RankWire.AI / – Ahead of its September policy session, the Bank of England maintains the Bank Rate at 3.75%, with inflation still exceeding its 2% goal. The Monetary Policy Committee (MPC) is set to announce its next interest rate decision on September 17. During this meeting, the Bank will also conduct its annual review of quantitative tightening, which involves reducing its holdings of government bonds. The current bond-reduction cycle, totaling £70 billion, is scheduled to conclude in September, but the Bank has yet to specify the next annual target.
In July, the nine-member MPC voted 6-3 to keep the Bank Rate at 3.75%. The three members in dissent favored a 25-basis-point hike to 4%. This vote left borrowing costs steady after previous rate cuts from the 5.25% peak reached in 2023. The Bank of England stated that monetary policy remains aimed at restoring consumer price inflation to the government’s 2% target in a sustainable manner.
UK consumer price inflation increased to 2.9% in July from 2.6% in June, based on data from the Office for National Statistics. CPIH inflation, which accounts for owner-occupier housing costs, rose to 3.1% from 2.8%. Meanwhile, core CPI held steady at 2.6%, and services inflation slowed slightly to 3.4% from 3.6%. The Office for National Statistics will publish August consumer price data on September 16, just one day before the MPC’s decision.
Inflation and economic growth shape the policy review
Recent economic indicators also point to ongoing UK expansion, with gross domestic product (GDP) increasing by 0.4% in July after a 0.3% rise in June and no growth in May. Over the three months ending in July, real GDP grew by 0.4% compared to the previous quarter, with services output climbing 0.6%, while production and construction each declined by 0.5%. Services remain the dominant component of the UK economy.
The Bank began quantitative tightening in 2022, ending reinvestment of maturing securities and later initiating active gilt sales. Under the current plan, the MPC has ordered a £70 billion reduction in gilt holdings from October 2025 through September 2026. Official statistics indicated a stock of £489.026 billion as of September 9, close to the £488 billion target. During the July-to-September quarter, the Bank scheduled five sales auctions covering short and medium maturity gilts.
Annual review of quantitative tightening approaches
The previous annual review already slowed the pace of quantitative tightening, with the MPC lowering the gilt-reduction target from £100 billion to £70 billion in September 2025. The policy also adjusted the maturity distribution of active gilt sales, allocating roughly 40% each to short and medium maturities and 20% to long-term gilts. The latest quarterly plan included no auctions for long-maturity gilts, although short and medium-term maturities remained part of the program.
This September’s meeting coincides the current interest rate decision with the annual review of the balance sheet. Until a final decision, the Bank Rate stays at 3.75%, and the £70 billion quantitative tightening cycle remains in effect. The Bank Rate impacts borrowing and savings costs across the UK financial system, though commercial rates are also affected by other factors. The upcoming announcement follows July’s data indicating higher consumer inflation, continued economic growth, and an Asset Purchase Facility nearing its existing gilt-reduction target.