20.08.202508:16:09UTC+00UK 10-Year Gilt Holds at 3-Month High

The yield on the UK 10-year gilt remained steady at 4.75%, marking its highest point in three months, following an unexpected rise in July inflation. This has diminished predictions for further easing by the Bank of England. The annual Consumer Price Index (CPI) increased to 3.8% from June's 3.6%, surpassing the anticipated 3.7%, with core inflation matching this rise. The surge, attributed mainly to higher costs of fuel, food, and transport, has driven inflation to its highest level in 18 months, casting doubt over the likelihood of imminent rate cuts. It appears prices may not peak until later this year, thereby restricting the Bank of England's ability to reduce rates, which is now seen as "severely limited." Market predictions currently suggest only a 40% likelihood of another rate cut in 2025, as opposed to earlier this month, when a full quarter-point cut was expected. Traders have reconsidered their positions following the narrow vote by the Bank of England for a 25 basis point cut in July, with several policymakers expressing concerns over potential secondary effects on wages and prices. Since then, steady growth and strong labor market figures have reinforced the stance for prudence, leading to persistently high yields.