FX Focus

Latest edition · September 17, 2026

FX Focus

The Bank of England held its policy rate at 3.75% in a 6-3 vote but delivered a hawkish shift as four hold-voters indicated building justification for a hike, prompting MUFG to project 25bp hikes in both November and February. Simultaneously, the BoE unveiled a multi-year QT blueprint to completely wind down its gilt holdings by 2034, temporarily halting market gilt auctions until April 2027.

At its September 2026 meeting, the Bank of England kept Bank Rate at 3.75% via an unchanged 6-3 vote split, yet conveyed a hawkish undertone as near-term inflation tracks towards exceeding 4% in Q1 2027. Governor Bailey and three other members indicated that tightening on a risk-management basis is gaining traction due to persistent Middle East conflict and energy supply risks. In response, MUFG expects 25bp hikes in November 2026 and February 2027 to reach 4.25%. Crucially, the BoE surprised markets by committing to fully wind down its gilt portfolio by September 2034 at an average annual pace of £46bn, while pausing gilt auctions until April 2027 pending Treasury agreement to sell gilts via the DMO, which relieved supply pressure and pushed down gilt yields alongside a pullback in GBP.

Key takeaways from the latest edition

• 1.The BoE kept the Bank Rate unchanged at 3.75% with an unchanged 6-3 vote split, but four of the six hold-voting members signaled that the case for rate tightening is building.
• 2.MUFG forecasts a 25bp rate hike in November followed by another move in February to bring Bank Rate to 4.25%, provided elevated energy prices persist.
• 3.The BoE announced a major overhaul of QT, committing to fully wind down its gilt portfolio by September 2034 with an average annual reduction of £46bn and pausing gilt auctions until April 2027.

What this series covers

• Macro view: The BoE moves closer to a hike
• We expect a move at the next meeting if energy prices remain elevated
• The BoE looks to draw a line under the QE era
• Markets view: BoE update drives down GBP & UK yields
• BoE rate hike expectations called back & QT sales paused until April
• CABLE VS. SHORT-TERM YIELD SPREAD

Edition archive

• FX Focus

  September 17, 2026

• FX Focus

  September 9, 2026

• FX Focus

  July 23, 2026