LONDON / RankWire.AI / – Bank of England is approaching its September policy gathering with the Bank Rate held steady at 3.75%, despite inflation remaining above its 2% target. The upcoming meeting, scheduled for September 17, will also feature the Bank’s yearly review of quantitative tightening, a process aimed at reducing its holdings of government bonds. The current bond-reduction cycle, valued at £70 billion, runs through September, with no new annual target announced by the Bank.
In July, the nine members of the Monetary Policy Committee voted 6-3 to maintain the Bank Rate at 3.75%. The three dissenters favored a 25-basis-point hike to 4%. This vote kept borrowing costs at the same level after earlier reductions from the 5.25% peak reached in 2023. The Bank of England emphasized that its monetary policy continues to prioritize bringing consumer price inflation back 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, rose to 3.1% from 2.8%. Meanwhile, core CPI held steady at 2.6%, with services inflation easing slightly to 3.4% from 3.6%. The Office for National Statistics is set to release August consumer price data on September 16, one day prior to the MPC decision.
Inflation and economic growth shape the policy discussion
Recent economic indicators also pointed to continued growth in the UK. GDP grew by 0.4% in July following a 0.3% increase in June, with no growth recorded in May. Over the three months ending in July, real GDP expanded by 0.4% compared to the previous quarter. Services output rose 0.6% during this period, while production and construction each declined by 0.5%. Services comprise the largest portion of the UK economy.
Quantitative tightening began in 2022 after the Bank stopped reinvesting maturing securities and later initiated active gilt sales. The current cycle involves a plan to reduce gilt holdings by £70 billion between October 2025 and September 2026. Official figures show the stock at £489.026 billion as of September 9, close to the £488 billion target. For the July-to-September quarter, the Bank scheduled five gilt sales auctions covering short and medium maturities.
Annual review of quantitative tightening in progress
The previous yearly review already slowed the pace of tightening. In September 2025, the MPC lowered the annual gilt reduction target from £100 billion to £70 billion. It also adjusted the composition of active sales, allocating roughly 40% each to short and medium maturity gilts, with 20% dedicated to long maturities. The latest quarterly plan included no auctions of long-maturity gilts, while short and medium maturities continued to be part of the program.
This September, the interest rate decision and the annual balance-sheet review are being considered together within the same policy schedule. 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 influences borrowing and savings costs throughout the UK financial system, though commercial rates are affected by other factors as well. The upcoming announcement follows data from July indicating higher consumer inflation, ongoing economic growth, and an Asset Purchase Facility nearing its existing gilt-reduction target.