LONDON / RankWire.AI / – Ahead of its September policy gathering, Bank of England maintains its Bank Rate at 3.75%, with inflation still exceeding the target. The Monetary Policy Committee will reveal its upcoming interest rate decision on September 17. This session will also mark the conclusion of their annual assessment of quantitative tightening, which involves shrinking the central bank’s holdings of government bonds. The current plan aims for a £70 billion reduction in gilt holdings from October 2025 through September 2026.
In July, the nine-member committee voted 6-3 to keep the Bank Rate steady at 3.75%, with three members supporting a quarter-point hike to 4%. This decision kept borrowing costs below the 5.25% peak reached in 2023, after several earlier rate cuts. The focus remains on guiding inflation back to the government’s 2% target sustainably. The upcoming September meeting will serve as the next official update on interest rates and the central bank’s balance sheet.
UK inflation accelerated in July, providing a key data point ahead of the decision. Consumer prices increased by 2.9% compared to the previous year, rising from 2.6% in June. CPIH inflation, which factors in owner-occupier housing costs, climbed to 3.1%. Meanwhile, core CPI remained at 2.6%, and services inflation slowed to 3.4% from 3.6%. The Office for National Statistics is scheduled to release August inflation figures on September 16, one day before the policy announcement.
Inflation figures remain pivotal for September’s verdict
Economic activity saw growth during the latest period reported. The gross domestic product increased by 0.4% in July, following a 0.3% rise in June and no change in May. Over the three months ending in July, GDP grew by 0.4% compared to the previous quarter. Services output contributed significantly, expanding by 0.6% and supporting overall growth. Conversely, both production and construction declined by 0.5%, as reported by the Office for National Statistics.
As the Bank of England concludes its annual quantitative tightening review, it approaches the final phase of its current gilt-reduction cycle. As of September 9, its government bond holdings stood at £489.026 billion, close to the £488 billion target set for this cycle. During July to September, five gilt sales were scheduled, focusing on short- and medium-term maturities, with no long-maturity gilts included in this quarter’s auctions.
Rate and bond reduction policies integrated into upcoming announcement
The current £70 billion annual reduction rate is slower than the previous target of £100 billion, approved in September 2025. The plan also shifted the composition of gilt sales, allocating approximately 40% each to short and medium maturities, with the remaining 20% dedicated to long maturities. This change in strategy reflects a more gradual approach.
Therefore, the September policy statement will combine two key elements of the UK’s monetary policy. The Bank Rate will stay at 3.75% until the committee issues a new decision, while the £70 billion quantitative tightening plan remains active through September. Official data show inflation above the 2% target and ongoing economic growth. The decision on September 17 will detail the committee’s choices regarding interest rates and the next stage of gilt reductions.