Investing.com — Following the release of recent data that showed a decrease in UK inflation in December, traders are predicting more interest-rate cuts from the Bank of England this year. This information has helped alleviate concerns regarding continuous price pressures that have been negatively impacting UK assets.
For the entire year, the money markets are now suggesting 50 basis points of reductions, which equates to two quarter-point movements. This is an increase from the less than 40 basis points that were implied on Tuesday.
In response to this, Gilts saw a significant increase, counteracting a rise in yields which had previously resulted in borrowing costs reaching their highest in many decades. This had sparked worries about the government’s fiscal strategies.
However, the problems facing Chancellor Rachel Reeves still persist. This was evidenced by a 10-year bond sale on Wednesday, where the borrowing cost was 4.81%, the highest it has been since 2008.
Traders are also concerned that this period of calm may not last, as US inflation data is set to be released later on Wednesday. This could potentially trigger another global increase in yields.
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