Borrowing costs for the UK government have plunged due to an unexpected drop in inflation. The yield on key UK government debt has dropped below 4.8%, easing pressure on Chancellor Rachel Reeves whose budget policies have faced criticism.
Analysts noted that the recent ease in inflation would provide the Bank of England more room to consider further rate cuts, which would significantly support the economy and improve investor sentiment.
Investors increased their bets on the possibility of an interest rate cut next month, with many expecting a second cut by the end of this year, reflecting adjusted market expectations following favorable inflation data.
In the US, core inflation unexpectedly fell to 3.2%, which, coupled with rising overall inflation, raised optimism that the US central bank might ease borrowing costs soon. This trend was echoed in global bond markets, including the UK.
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