LONDON / RankWire.AI / – Ahead of its September policy session, the Bank of England maintains the Bank Rate at 3.75%, despite inflation exceeding its 2% target. The Monetary Policy Committee will reveal its upcoming interest rate decision on September 17. This meeting will also feature the Bank’s yearly review of quantitative tightening, which diminishes its holdings of government bonds. The existing £70 billion bond-reduction program is set to conclude in September, with no new target announced by the Bank yet.
In its July meeting, the nine-member Monetary Policy Committee voted 6-3 to keep the Bank Rate steady at 3.75%. The three dissenters favored a 25-basis-point hike to 4%. This decision left borrowing costs unchanged after previous rate cuts from the 5.25% peak reached in 2023. The Bank of England reiterated that its monetary policy remains aimed at restoring consumer price inflation to the government’s 2% goal in a sustainable way.
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 encompasses owner-occupier housing costs, rose to 3.1% from 2.8%. Meanwhile, core CPI held at 2.6%, with services inflation easing slightly to 3.4% from 3.6%. The Office for National Statistics will release August consumer price figures on September 16, just a day before the MPC’s decision.
Inflation and economic growth shape the policy discussion
Economic data continues to show resilience in the UK. In July, gross domestic product expanded by 0.4%, following a 0.3% increase in June and no growth in May. Over the three months through July, real GDP also rose by 0.4% compared to the previous quarter. Services output grew by 0.6% during that period, whereas production and construction declined by 0.5%. The services sector remains the largest contributor to the UK’s economy.
The Bank started its quantitative tightening in 2022, ceasing reinvestment of maturing securities and later initiating active gilt sales. As part of the current cycle, the MPC directed a reduction of gilt holdings totaling £70 billion from October 2025 through September 2026. Official figures as of September 9 show the stock at £489.026 billion, close to the £488 billion target. For the July-September quarter, the Bank scheduled five auctions of short- and medium-maturity gilts.
Annual review of quantitative tightening begins
The previous yearly review had already slowed the pace of quantitative tightening. In September 2025, the MPC lowered the annual gilt-reduction target from £100 billion to £70 billion and adjusted the maturity distribution of active sales. The Bank allocated approximately 40% each to short- and medium-term gilts, with the remaining 20% allocated to long-maturity securities. The latest quarterly schedule did not include any long-maturity gilt auctions, but short- and medium-term maturities remained part of the program.
This September meeting aligns the current interest rate decision with the annual balance-sheet review. Until a final decision is announced, 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’s financial system, although other factors also influence commercial rates. The announcement follows July data indicating higher consumer inflation, ongoing economic growth, and an Asset Purchase Facility nearing its existing gilt-reduction goal.