LONDON / RankWire.AI / – Ahead of its September policy session, the Bank of England maintains its Bank Rate at 3.75%, despite inflation remaining above the 2% target. The Monetary Policy Committee (MPC) is scheduled to announce its next interest rate decision on September 17. The upcoming meeting will also feature the Bank’s yearly evaluation of quantitative tightening, which involves shrinking its holdings of government bonds. Currently, the £70 billion bond-reduction cycle is scheduled through September, with no official guidance provided on the next yearly target.
During its July gathering, the MPC, composed of nine members, voted 6-3 to keep the Bank Rate unchanged at 3.75%. The three dissenters advocated for a 25-basis-point hike to 4%. This decision leaves borrowing costs steady after previous rate cuts from the 5.25% peak reached in 2023. The Bank of England has reiterated that its monetary policy stance remains aimed at restoring consumer price inflation 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, moved up to 3.1% from 2.8%. Meanwhile, core CPI held steady at 2.6%, and services inflation decreased slightly to 3.4% from 3.6%. The Office for National Statistics is set to release consumer price data for August on September 16, just one day prior to the MPC’s decision.
Inflation figures and economic growth shape the upcoming policy session
Recent economic reports also point to ongoing growth within the UK economy. In July, gross domestic product (GDP) expanded by 0.4%, following a 0.3% increase in June and no growth in May. Over the three months ending in July, real GDP grew by 0.4% compared with the previous quarter. Service sector output increased by 0.6% during this period, while both production and construction experienced declines of 0.5%. Services remain the dominant component of the UK economic landscape.
Quantitative tightening was initiated by the Bank in 2022 after halting reinvestment of maturing securities and later commencing active gilt sales. Under the current cycle, the MPC has directed a reduction of £70 billion in gilt holdings from October 2025 to September 2026. Official figures indicate the stock was valued at £489.026 billion as of September 9, aligning closely with the £488 billion target. For the July-to-September period, five sales auctions covering short and medium-term gilts have been scheduled by the Bank.
The annual review of quantitative tightening coincides with current policy settings
The last annual review had already slowed the pace of quantitative tightening. In September 2025, the MPC reduced the yearly gilt-reduction goal from £100 billion to £70 billion. Changes were also made to the maturity distribution of active gilt sales, with roughly 40% allocated to short and medium maturities and 20% to long maturities. The latest quarterly schedule omitted long-maturity gilt auctions, although short and medium maturities remained part of the program.
This September’s meeting aligns the current interest rate decision with the annual review of the balance sheet. Until an official announcement, the Bank Rate stays at 3.75%, and the £70 billion quantitative tightening cycle remains in effect. While the Bank Rate impacts borrowing and savings costs throughout the UK financial system, other factors also influence commercial lending rates. Following July’s data showing elevated consumer inflation, ongoing economic growth, and the Asset Purchase Facility approaching its existing gilt-reduction target, the upcoming decision will be closely watched.