FX.co ★ UK Gilt Yields Dip After Dovish BoE Signals

In the afternoon trading session, the yield on the UK's 10-year gilt declined to 4.55%, retracting earlier gains. This movement followed the Bank of England's decision to keep interest rates steady at 3.75%. Notably, the bank's tone appeared more dovish than market participants had predicted. While maintaining the rate was largely expected, the surprising element was the vote split. Out of nine Monetary Policy Committee members, four advocated for an immediate 25 basis point cut to 3.5%, expressing confidence that the Consumer Price Index (CPI) inflation rate would align closer to the 2% target by April. The Bank emphasized that while threats from ongoing inflation pressures have dissipated, there is a notable decline in demand and evidence of a weakening labor market. Earlier in the day, gilt yields surged to a peak of 4.612%—a level not seen in over three months. This spike was fueled by political instability following Prime Minister Keir Starmer's appointment of Peter Mandelson as the UK's ambassador to the US, a decision drawing criticism due to Mandelson's previous associations with Jeffrey Epstein.