LONDON / RankWire.AI / – Bank of England approaches its September policy gathering with Bank Rate steady at 3.75% and inflation still above the target. The Monetary Policy Committee will reveal its next interest rate decision on September 17. They will also conclude their yearly review of quantitative tightening, which aims to reduce the central bank’s holdings of government bonds. Currently, the program targets a £70 billion reduction in gilt holdings from October 2025 to September 2026.
In July, the nine-member committee decided 6-3 to keep Bank Rate at 3.75%. Three members pushed for a quarter-point hike to 4%. This decision kept borrowing costs below the 5.25% peak reached in 2023, after earlier rate cuts. The focus remains on restoring inflation to the government’s 2% goal sustainably. The September meeting will be the next official update on interest rates and the central bank’s balance sheet.
UK inflation increased in July, providing an important data point ahead of the meeting. Consumer prices grew 2.9% compared to last year, up from 2.6% in June. CPIH inflation, which covers owner-occupier housing costs, rose to 3.1%. Core CPI stayed at 2.6%, while services inflation slowed to 3.4% from 3.6%. The Office for National Statistics will release August inflation figures on September 16, just one day before the policy decision.
Inflation data remains key to September’s decision
Economic growth was also positive in the latest period. Gross domestic product increased by 0.4% in July. June saw a 0.3% rise, and May had no growth. Over the three months ending in July, GDP grew 0.4% compared to the previous three months. Services output rose 0.6% over that period, supporting overall growth. However, production and construction both fell by 0.5%, according to the Office for National Statistics.
The Bank of England is nearing the end of its annual quantitative tightening review. Its government bond holdings stood at £489.026 billion on September 9, close to the target of £488 billion for this cycle. The bank scheduled five gilt sales for July through September. These focused on short and medium-term maturities, with no long-term gilts included in this quarter’s plan.
Bond holdings and rate decisions intertwined in September
The current £70 billion yearly reduction is slower than the previous cycle’s target of £100 billion. Policymakers approved this lower figure in September 2025. They also adjusted the mix of active gilt sales across maturities. About 40% of sales were set for short maturities, another 40% for medium ones, and the remaining 20% for long-maturity gilts.
This September’s meeting combines two major aspects of UK monetary policy. Bank Rate will stay at 3.75% until a new decision is announced. The £70 billion quantitative tightening plan will also continue through September. Official data show inflation above 2% and ongoing economic growth. The decision on September 17 will outline the committee’s plan for interest rates and the next steps in reducing gilt holdings.