The Bank of England confirmed the interest rates stopped at 4%, after the cut of 25 basic points announced in early August, and also confirmed a slowdown in the quantitative tightening, the disposal plan of the government bonds (GILT) in wallet, from the 100 billion pounds current at about 70 billion per month. A decision that perfectly respects the expectations of the market and takes into account the worsening of economic conditions and the disinflation process.
Confirmed rates and reduced QT
The Monetary Policy Committee (MPC), in the meeting that ended on September 17, 2025, voted by a majority of 7 out of 9 members to keep the discount rate at 4%. Two members voted to reduce the discount rate of 25 points bases to 3.75%.
It slows down the rhythm of the qt. The Committee has in fact voted by a majority of 7 out of 9 members to reduce the pace of disposal of the assets in the portfolio, bringing it from 100 to 70 billion pounds in the next 12 months, for a total of 488 billion pounds.
Boe focused on elimination of inflationary pressures
In the last two and a half years, a substantial disinflation has occurred, in the wake of previous external shocks, – reads the Bank of England statement – supported by the restrictive orientation of monetary policy. These progress has made it possible to reduce the discount rate in the last year, but the board remains focused on the elimination of any persistent, existing or emerging inflationary pressures, to report inflation in a sustainable way to its 2% objective in the medium term.
Basically disinflation continued, although with greater progress in the attachment of wage pressures than prices. Inflation at twelve months stood at 3.8% in August and a slight increase is expected in September. The monetary policy committee remains vigilant on the risk that this temporary increase in inflation may exert further pressure up on the process of determining wages and prices. Wage growth remains high, but has decreased and a significant slowdown in the rest of the year is expected.
GDP growth remains contained
The growth of the UK GDP has remained contained, in line with a continuous and gradual loosening of the labor market, as well as with a certain degree of inactivity in the economy. Reduction risks remain, both internal and geopolitical, as regards economic activity.
Remains gradual and cautious approach
For this reason, the Committee has confirmed a gradual and cautious approach to monetary policy, evaluating that the further loosening of the restrictions of monetary policy remains appropriate. The timing and the rhythm of future reductions in the restriction of politics will depend on the extent that the underlying disappointment pressures will continue to loosen. Monetary policy does not follow a predefined path and the committee will continue to be based on outgoing data.
