LONDON / RankWire.AI / – The Bank of England heads into its September policy meeting with Bank Rate at 3.75% and inflation above target. The Monetary Policy Committee will announce its next interest rate decision on September 17. Members will also complete their annual review of quantitative tightening, which reduces the central bank’s government bond holdings. The existing program calls for a £70 billion reduction in gilt holdings between October 2025 and September 2026.
The nine-member committee voted 6-3 in July to leave Bank Rate unchanged at 3.75%. Three members supported a quarter-point increase to 4%. The decision kept borrowing costs below the 5.25% peak reached in 2023 after several earlier rate reductions. Monetary policy remains focused on returning inflation sustainably to the government’s 2% target. The September meeting will provide the next formal update on both interest rates and the central bank’s balance sheet.
UK inflation accelerated in July, adding another key data point ahead of the meeting. Consumer prices rose 2.9% from a year earlier, up from 2.6% in June. CPIH inflation, which includes owner-occupier housing costs, increased to 3.1%. Core CPI held at 2.6%, while services inflation eased to 3.4% from 3.6%. The Office for National Statistics will publish August inflation figures on September 16, one day before the policy announcement.
Inflation data remains central to September decision
Economic activity also expanded during the latest reported period. Gross domestic product rose 0.4% in July after growth of 0.3% in June and no growth in May. GDP increased 0.4% in the three months through July compared with the previous three months. Services output gained 0.6% over that period and continued to support overall growth. Production and construction both fell 0.5%, according to the Office for National Statistics.
The Bank of England also reaches its annual quantitative tightening review with its current gilt-reduction cycle nearing completion. Its government bond holdings stood at £489.026 billion on September 9, close to the £488 billion target for the current cycle. The central bank scheduled five gilt sales for the July-to-September quarter. Those auctions focused on short and medium maturities, with no long-maturity sales included in the quarterly schedule.
Bond portfolio review joins rate decision
The current £70 billion annual reduction represents a slower pace than the £100 billion target used in the previous cycle. Policymakers approved that lower amount in September 2025. They also changed the planned mix of active gilt sales across different maturities. About 40% of sales were allocated to short maturities and another 40% to medium maturities. Long-maturity gilts accounted for the remaining 20% of the planned active sales mix.
The September meeting therefore combines two major elements of UK monetary policy in one scheduled announcement. Bank Rate remains at 3.75% until the committee publishes a new decision, while the £70 billion quantitative tightening plan remains in effect through September. The latest official data show inflation above the 2% target and continued economic growth. The policy announcement on September 17 will set out the committee’s decisions on interest rates and the next phase of the gilt-reduction program.