Gilt Yields Ease as Traders Scale Back Rate Hike Bets
The UK 10-year gilt yield fell below 5.4% as investors pared back expectations for Bank of England (BoE) rate hikes. Chief Economist Huw Pill, one of the bank’s most hawkish policymakers, expressed skepticism over market pricing of four rate increases over the coming year. While arguing that the BoE should have acted sooner to address the energy shock triggered by the Iran war, he said stronger evidence was needed to justify a larger rate increase. Governor Andrew Bailey, however, warned that a rate hike would become increasingly difficult to avoid if the energy shock persists. Markets still see an almost 100% chance of a first increase in more than three years at the November meeting, with further hikes expected through July 2027. Meanwhile, the IMF has warned the UK government needs to explain how it will cover the cost of increased defense spending, as the country faces an additional annual bill of £11 billion to raise military spending to 3% of GDP by 2030.
4% as investors pared back expectations for Bank of England (BoE) rate hikes. Chief Economist Huw Pill, one of the bank’s most hawkish policymakers, expressed skepticism over market pricing of four rate increases over the coming year. While arguing that the BoE should have acted sooner to address the energy shock triggered by the Iran war, he said stronger evidence was needed to justify a larger rate increase. Governor Andrew Bailey, however, warned that a rate hike would become increasingly difficult to avoid if the energy shock persists.
Markets still see an almost 100% chance of a first increase in more than three years at the November meeting, with further hikes expected through July 2027. Meanwhile, the IMF has warned the UK government needs to explain how it will cover the cost of increased defense spending, as the country faces an additional annual bill of £11 billion to raise military spending to 3% of GDP by 2030.