LONDON / RankWire.AI / – The Bank of England approaches its September policy gathering with the Bank Rate held at 3.75%, amid inflation that remains above the target level. The Monetary Policy Committee (MPC) will disclose its forthcoming interest rate decision on September 17. Additionally, members will conclude their yearly assessment of quantitative tightening, which involves diminishing the central bank’s holdings of government bonds. The current scheme plans for a £70 billion reduction in gilt holdings spanning from October 2025 to September 2026.
In July, the nine-person committee voted 6-3 to maintain the Bank Rate at 3.75%. A minority of three members advocated for a quarter-point hike to 4%. This decision kept borrowing costs beneath the 5.25% peak reached in 2023, following several earlier rate cuts. The Bank’s monetary policy continues to prioritize returning inflation to the government’s 2% target in a sustainable manner. The upcoming September meeting will serve as the next formal update on both interest rates and the central bank’s balance sheet management.
UK inflation saw an increase in July, providing another important data point before the policy decision. Consumer prices grew by 2.9% compared to the previous year, up from 2.6% in June. CPIH inflation, which accounts for owner-occupier housing costs, rose to 3.1%. Meanwhile, core CPI remained steady at 2.6%, and services inflation eased slightly to 3.4% from 3.6%. The Office for National Statistics will release August inflation figures on September 16, a day prior to the policy announcement.
Inflation figures remain pivotal for September’s policy choice
Economic activity also experienced growth during the most recent 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 three months. The services sector contributed with a 0.6% rise over that span, supporting overall economic expansion. Conversely, production and construction sectors both contracted by 0.5%, according to the Office for National Statistics.
Meanwhile, the Bank of England is nearing the conclusion of its annual quantitative tightening review as its gilt-reduction cycle approaches its finish. As of September 9, government bond holdings stood at £489.026 billion, close to the £488 billion target for this cycle. During July through September, five gilt sales were scheduled, primarily focused on short and medium maturities, with no long-maturity gilts included in this quarter’s plans.
Gilt reduction plans and rate decisions converge in September review
The current £70 billion annual reduction pace is slower than the previous target of £100 billion, which was approved in September 2025. Adjustments were also made to the composition of gilt sales across different maturities, with roughly 40% allocated to short maturities, another 40% to medium, and the remaining 20% to long-term gilts.
Therefore, the September policy announcement will combine two key elements of UK monetary policy—interest rates and gilt reduction—within a single scheduled event. The Bank Rate will stay at 3.75% until a new decision is announced, while the £70 billion quantitative tightening plan remains active through September. The latest official data indicate inflation above the 2% target and ongoing economic growth. The policy decision on September 17 will specify the committee’s stance on interest rates and the next steps for the gilt-reduction program.