LONDON / RankWire.AI / – The Bank of England is set to hold its September policy gathering with Bank Rate at 3.75%, amid inflation levels exceeding its 2% target. The Monetary Policy Committee will announce its next interest rate decision on September 17. The session will also feature the Bank’s annual evaluation of quantitative tightening, which involves reducing its holdings of government bonds. The current £70 billion bond-reduction cycle will conclude in September, though the Bank has yet to specify the following year’s target.
During the July meeting, the nine-member MPC voted 6-3 to keep the Bank Rate steady at 3.75%. The three dissenters advocated for a 25-basis-point increase to 4%. This vote maintained the borrowing costs unchanged after previous rate cuts from the 5.25% peak in 2023. The Bank of England emphasized that its monetary policy remains aimed at restoring consumer price inflation to the government’s 2% goal in a sustainable manner.
UK consumer price inflation was reported to have risen 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, increased from 2.8% to 3.1%. Meanwhile, core CPI held steady at 2.6%, with services inflation easing slightly from 3.6% to 3.4%. The Office for National Statistics is scheduled to release August consumer price data on September 16, one day before the MPC’s decision.
Inflation trends and economic growth shape the policy discussion
Recent economic figures also point to ongoing UK growth. In July, gross domestic product expanded by 0.4% following a 0.3% increase in June, with no change recorded in May. Over the three months ending in July, real GDP also grew by 0.4% compared to the previous quarter. Service sector output increased by 0.6% during this period, while production and construction each declined by 0.5%. Services remain the largest sector within the UK economy.
The Bank initiated quantitative tightening in 2022 after halting reinvestment of maturing securities and later beginning active gilt sales. Under the current cycle, the MPC has mandated a reduction of £70 billion in gilt holdings from October 2025 to September 2026. Official data shows the total at £489.026 billion as of September 9, close to the £488 billion target. For the July to September quarter, the Bank has scheduled five gilt sale auctions covering both short and medium maturity securities.
Annual review of quantitative tightening approach
The previous yearly review already slowed the pace of quantitative tightening. In September 2025, the MPC reduced the annual gilt reduction target from £100 billion to £70 billion. Changes were also made to the maturity mix for active sales, with approximately 40% allocated to short and medium-term gilts each, and 20% to long maturities. The latest quarterly schedule did not include auctions of long-maturity gilts, though short and medium-term securities remained part of the program.
The upcoming September meeting coincides with the timing of the current interest rate setting and annual balance-sheet review. Until an official decision is announced, the Bank Rate remains at 3.75%, and the £70 billion quantitative tightening cycle stays in effect. The Bank Rate directly impacts borrowing and savings costs across the UK financial system, although other factors also influence commercial interest rates. The September announcement follows data from July indicating higher consumer inflation, continued economic expansion, and an Asset Purchase Facility nearing its existing gilt-reduction target.