The yield on the UK 10-year gilt slipped below 5% as falling oil prices helped ease near-term inflation concerns. Brent crude pulled back from two-month highs after the U.S. and Iran paused hostilities and resumed diplomatic contacts, prompting money markets to trim expectations for further monetary tightening.
Investors are now focused on the Bank of England’s policy decision later this week, with policymakers widely expected to keep interest rates unchanged at 3.75%. Recent inflation figures have supported this outlook: annual consumer price growth slowed to 2.6% in June, a 15‑month low and below the BoE’s projections.
A delayed pass-through of higher wholesale energy prices into regulated household bills has also helped keep UK inflation lower than in the U.S. and the euro area, where the European Central Bank is still expected to raise rates again in September or October.
