PREVIEW: BoE Announcement on Thursday 17th September 2026 at 12:00 BST/07:00 EDT

• Expected to hold Bank Rate at 3.75%, with the vote split likely mirroring the July decision at 6–3.
• The annual QT vote is also due, with the pace of balance-sheet reduction expected to slow to GBP 50bln from GBP 70bln. Active sales are expected to remain at around GBP 20bln, although reports suggest the BoE will halt sales of long-dated gilts.
• Incoming data since the previous meeting have been mixed but, on balance, supportive of a hold, while the proximity of the Autumn Budget also argues against a significant policy shift or signal at this meeting.

OVERVIEW

The MPC is expected to hold the base interest rate at 3.75%, a view unanimously shared by all 65 correspondents polled by Reuters this month, with 57 expecting rates to remain on hold throughout the year and eight seeing the end-year rate at 4.00%. Market pricing points to an ~70% chance of a hold and ~30% chance of a 25bps hike at the upcoming meeting. On the Bank Rate, focus is on the vote split, with broad expectations for a 6-3 decision to hold, mirroring the July meeting. Pill, Greene and Mann are expected to vote for a 25bps hike, citing concerns that energy shocks are feeding into broader inflation expectations, while the remaining members are expected to opt to wait and see.

The MPC is also due to hold its annual vote on the pace of QT, with expectations for a GBP 50bln reduction, down from GBP 70bln, primarily due to a lower volume of naturally maturing gilts. Active sales are still expected to remain around GBP 20bln, although the composition of those sales has become a key focus. The Telegraph reported that the BoE is preparing to halt active sales of 20- and 30-year gilts, while continuing to sell shorter- and medium-dated bonds, amid heightened pressure at the long end of the gilt curve.

The backdrop for this meeting is persistent inflation risks stemming from the ongoing conflict in the Middle East and elevated energy prices. Domestically, data has been mixed (see below). Note: The BoE's next policy announcement falls on the 5th November, allowing time to digest the Autumn budget on 28th October. Commentary since the prior meeting has also been mixed and reinforces expectations for a split decision. Pill, Greene and Mann have maintained a hawkish stance.

As this is not a Monetary Policy Report (MPR) meeting, no formal press conference will follow. However, BoE Governor Bailey will likely give the customary pooled broadcast interview.

PRIOR MEETING

At the July meeting, the MPC maintained the Bank Rate at 3.75% in a 6-3 split decision. The majority preferred to assess incoming data on domestic price pressures, while the minority voted for a 25bps increase due to stickier services inflation and external supply shocks. The main focus of the statement was on second-round effects, making clear that "There is little evidence so far to suggest such effects...", though the risk increases the longer energy prices remain elevated. Those who voted to hold recognised the potential need for additional restraint if material second-round effects emerge; the policy strategy could change if inflation upside risks subside durably and underlying disinflation continues. Those who voted to hike were "concerned" that second-round effects could be "material", and argued that a "proactive" hike would guard against this, taking the view that tightening and then "course correcting" would be less costly than the alternative. The press conference had two key points: Lombardelli said her decision, a hold, was not a close call; pertinent as she was next on-watch for a hawkish shift. Secondly, Bailey said it would be wrong to conclude the BoE is edging towards a hike, a remark that sparked a notable dovish reaction at the time.

DATA

Inflation (16th September): August CPI inflation rose to 3.1% Y/Y (exp. 3.1%, prev. 2.9%), driven by sharp increases in petrol and diesel prices alongside higher airfares, particularly for long-haul journeys. Crucially for the MPC, underlying domestic services pressures remained sticky, with CPI services inflation unchanged at 3.4%, while core CPI held at 2.6% Y/Y (exp. 2.6%, prev. 2.6%). Upstream price pressures were firmer, with PPI input inflation rising to 6.1% Y/Y (exp. 5.4%, prev. 5.8%) and output prices accelerating to 3.7% (exp. 3.3%, prev. 3.3%), signalling that pipeline inflation risks remain skewed to the upside.

Growth (11th September): July GDP was notably firmer than expected, rising 0.4% M/M (exp. 0.0%, prev. 0.3%) and 1.6% Y/Y (exp. 1.2%, prev. 1.1%), with services once again driving activity as computer programming and AI-related businesses made the largest contribution. The three-month growth rate held at a relatively robust 0.4% (exp. 0.3%), while manufacturing production rebounded sharply by 0.9% M/M (exp. 0.2%, prev. -0.5%) and industrial production rose 0.2% (exp. -0.2%, prev. -0.2%). However, construction remained weak, falling 2.5% Y/Y (exp. -2.3%).

Labour Market (15th September): The latest labour data were mixed but showed further signs of cooling. Average Earnings ex-bonus held at 3.5% (exp. 3.5%, prev. 3.5%), while total pay growth eased to 3.9% (exp. 3.9%, prev. 4.2%). The unemployment rate remained at 4.9%, slightly better than the expected rise to 5.0%, but employment growth slowed to 67k from 83k. More notably, the claimant count rose by 27.8k (exp. +8.3k, prev. -11.8k), while HMRC payrolls fell by 26k (exp. -5k, prev. -19k), reinforcing signs that labour demand continues to soften.

PMIs (21st August): Services PMI rose to 52.8 (exp. 51.8) and the Composite PMI increased to 52.5 (exp. 51.6), while Manufacturing was in line at 51.5. S&P Global noted that business confidence improved and job losses moderated, with the data consistent with around 0.3% Q3 growth. "The data suggest the Bank of England looks likely to keep a hawkish bias but will stay cautious, holding off any rate hikes until the growth and inflation trajectories become clearer," S&P Global said.

RECENT COMMENTARY

Chief Economist Pill (13th August/3rd September) has argued that the growth outlook strengthens the case for a hike and continues to favour prompt policy action. Greene (8th September) remains concerned that persistently elevated oil prices could generate second-round effects, while Mann (1st September) prefers policy to err on the side of being slightly too restrictive.

Meanwhile, Governor Bailey (28th August) highlighted subdued second-round effects so far and signs of labour-market softening, arguing that the MPC can continue to monitor the situation, while Ramsden (8th September) described domestic inflation pressures as relatively benign and took reassurance from wage developments. Taylor (8th September) similarly judged that maintaining a moderately restrictive stance currently provides sufficient insurance, while noting that continued underlying disinflation and an easing of the energy shock would strengthen the case for eventual easing.

ARGUMENTS

CASE FOR A HIKE

• The case for tightening rests on the risk that the energy shock proves larger and more persistent than initially anticipated, allowing higher energy costs to feed into wages, prices and inflation expectations.
• Oil and European gas prices have climbed sharply amid the Middle East conflict. Middle Eastern geopolitical tensions show no signs of easing, with the US and Iran exchanging strikes in recent days, while the Houthi/Saudi front has also escalated, further constraining energy supply.

CASE FOR A HOLD

• The case for holding rests on the view that there is still insufficient evidence of meaningful second-round effects from the energy shock, and that monetary policy should avoid responding mechanically to an externally driven rise in energy prices.
• Recent survey evidence also provides some reassurance. The BoE's latest Decision Maker Panel (DMP) showed one-year CPI expectations falling to 3.1% from 3.4%, while firms' expected wage growth remained contained, offering little evidence so far that the energy shock is becoming embedded in broader inflation expectations. Together with signs of labour-market softening, this supports the case for maintaining the policy rate.
• Further, it would be in the MPC's best interest to wait for the Autumn budget on 28th October before making policy decisions or signalling the direction of policy.

PACE OF QT

The MPC will also conduct its annual vote on the pace of quantitative tightening, with market participants expecting the gilt stock to be reduced by around GBP 50bln in the year to September 2027, versus GBP 70bln under the current programme. Active gilt sales are expected to remain at ~GBP 20bln, with passive runoff at ~GBP 30bln.

The maturity composition is now likely to attract at least as much attention as the headline QT target. The current programme already skews active sales away from the long end at 40% short, 40% medium and 20% long, but the Telegraph reports that the BoE is preparing to go further and halt sales of 20- and 30-year gilts altogether. Active sales would continue, reportedly at around GBP 20bln, but would instead be concentrated in short- and medium-dated gilts. If confirmed, the move would reduce the direct supply pressure from QT at the long end, where gilt yields have risen sharply, while allowing the Bank to continue shrinking its balance sheet. The report also suggests a change to the operational framework, with the BoE considering selling short- and medium-dated gilts directly to the DMO rather than into the market through its existing auction process. On that note, participants could expect a separate Market Notice release alongside the MPC announcement for details on the QT operations.

Deputy Governor Ramsden has argued that QT remains "very much in the background" as a driver of gilt yields, reiterating that Bank Rate is the MPC's primary monetary-policy tool. He cited BoE analysis suggesting cumulative QT has raised gilt yields by around 20-30bps, which he contrasted with an approximately 200bps increase in the 10yr term premium since early 2022, highlighting the relatively modest contribution of QT to the broader rise in yields. As a reminder, during the September 2025 meeting, the committee voted 7-2 to slow the bond rundown to GBP 70bln. Chief Economist Pill voted to maintain the GBP 100bln pace, as he viewed the impact of the sales on financial markets as modest.

HOUSE VIEWS

ING argues that sterling rates continue to price a notably hawkish BoE narrative, which it views as somewhat overdone relative to central-bank communication and the broader macro backdrop. While ING retains a structurally bullish view on sterling rates, it sees the near-term trade as difficult given elevated uncertainty around oil prices. In its view, clearer and more predictable energy-price dynamics would be needed before more attractive tactical opportunities emerge.

Goldman Sachs believes that market pricing for Bank Rate remains too hawkish relative to its outlook. Goldman expects the MPC to leave rates unchanged through the remainder of 2026, before beginning to cut in 2027.

HSBC says that while one further inflation and labour-market release is due before the September decision, it does not currently see sufficient evidence for the MPC's holders to change their votes. As things stand, it therefore expects the existing majority in favour of keeping Bank Rate unchanged to remain intact.

Oxford Economics believes the absence of meaningful second-round inflation effects gives the MPC scope to keep Bank Rate unchanged, with a 6-3 hold still expected as Greene, Pill and Mann continue to back a hike. While higher oil and gas prices remain an upside risk, Oxford expects the majority to stay patient and retain a hawkish tone rather than tighten immediately.