FX.co ★ UK 10-Year Gilt Yield Pulls Back

The yield on UK 10-year gilts decreased by 6 basis points to 4.559% on Thursday, recovering slightly from a significant 16 basis point increase observed the previous day. This shift occurred after Prime Minister Keir Starmer expressed strong support for Chancellor Rachel Reeves, stating that she would retain her position "for many years to come." The markets had been unsettled by earlier rumors regarding her potential replacement, sparking concerns about possible shifts in fiscal policy discipline. Concurrently, Bank of England policymaker Alan Taylor advocated for a quicker reduction in interest rates, warning of increased risks of a severe economic downturn. Governor Andrew Bailey confirmed that the trend for interest rates is "downwards," although the final stopping point remains unclear. He noted that inflation is primarily being driven by regulated prices rather than by demand, with the early indication of weakening in both the economic and labor markets. Despite expectations of a 25 basis point rate cut in September, the Bank of England is adopting a more cautious approach compared to other central banks.