The Bank of England published a decision on 17 September to hold Bank Rate at 3.75% after a 6–3 vote by its Monetary Policy Committee. The meeting ended on 16 September. Three members preferred an immediate 25-basis-point increase to 4%. The majority judged that domestic activity and tight financial conditions were restraining inflationary pressures, although the risk of second-round effects was growing.
The Bank said twelve-month consumer price inflation was 3.1% in August and could rise to slightly above 4% early in 2027. It linked the near-term increase chiefly to the energy-price shock associated with the Middle East conflict. The minutes said underlying disinflation had continued over the course of the year and wage inflation had generally been moderating. It also noted that labour market conditions remained soft.
A DIVIDED POLICY COMMITTEE
Governor Andrew Bailey and five other members voted to leave Bank Rate unchanged. Megan Greene, Catherine L Mann and Huw Pill favoured a quarter-point increase. The minority said slack appeared to have peaked, increasing the likelihood of meaningful second-round effects, and that a proactive increase would help anchor inflation expectations.
The committee judged that risks to the inflation outlook were tilted further to the upside than at its previous meeting. It also said there was limited evidence so far of second-round effects from the energy shock. The committee said it stands ready to act as necessary to ensure that CPI inflation remains on track to meet the 2% target in the medium term.
GILT UNWIND SET THROUGH 2034
The Asset Purchase Facility held £488 billion of gilts in September after declining from a £895 billion peak in February 2022. The Bank plans to set aside £120 billion of the longest-dated bonds to back banknote issuance, leaving £368 billion to unwind for monetary-policy purposes. Of that balance, £222 billion is expected to mature by completion and £146 billion is to be sold.
The plan implies average annual reductions of £46 billion through September 2034, including annual sales of £20 billion alongside maturities. The Bank said its APF gilt auctions would pause until it announces, by April 2027, the operational details for implementing the plan, including a possible model of sales to the Government.