LONDON / RankWire.AI / – Ahead of its September policy gathering, the Bank of England is maintaining the Bank Rate at 3.75%, with inflation levels still exceeding the target. The Monetary Policy Committee is set to declare its upcoming interest rate decision on September 17, while also finalizing their annual review of quantitative tightening, which involves shrinking the central bank’s holdings of government bonds. The current plan aims for a £70 billion decrease in gilt holdings from October 2025 through September 2026.
In the July session, the nine-member committee voted 6-3 to keep the Bank Rate steady at 3.75%, with three members supporting an increase of a quarter-point to 4%. This decision kept borrowing costs below the 5.25% peak reached earlier in 2023 following a series of rate cuts. The bank’s monetary policy continues to prioritize bringing inflation back to the government’s 2% target in a sustainable manner. The upcoming September meeting will serve as the next official occasion to update the public on both interest rates and the central bank’s balance sheet strategy.
UK inflation continued to accelerate in July, providing another important data point ahead of the policy decision. Consumer prices increased 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 at 2.6%, while services inflation eased slightly from 3.6% to 3.4%. The Office for National Statistics will release the inflation figures for August on September 16, just one day before the policy announcement.
Inflation figures are key to September’s policy choice
Economic activity also experienced growth in the latest reporting period. 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 leading up to July, GDP grew by 0.4% compared to the previous three months, with services output rising by 0.6% during that period and continuing to bolster overall growth. Conversely, production and construction declined by 0.5%, according to the Office for National Statistics.
The Bank of England is approaching the conclusion of its annual quantitative tightening review, with its current gilt reduction cycle nearing completion. As of September 9, its government bond holdings stood at £489.026 billion, close to the £488 billion target set for this cycle. The central bank scheduled five gilt sales for the July-to-September period, primarily focusing on short and medium maturities, excluding any long-maturity gilts from that quarterly plan.
The bond reduction review merges with rate policy updates
The current plan to reduce £70 billion annually is slower than the previous cycle’s £100 billion target, a decision approved in September 2025. Additionally, the composition of gilt sales across maturities was adjusted, with about 40% allocated to short-term, another 40% to medium-term, and the remaining 20% designated for long-maturity gilts. Consequently, the September policy announcement will address both the interest rate decision and the next phase of the gilt reduction program. Until the committee makes a new decision, the Bank Rate stays at 3.75%, and the £70 billion quantitative tightening scheme remains in effect through September. The latest official data show inflation above the 2% target alongside ongoing economic growth, with the upcoming statement on September 17 expected to clarify the committee’s stance on interest rates and the future of gilt sales.