FX.co ★ UK 10-Year Gilt Yield Falls to Over 1-Week Low after Soft CPI Data

The yield on the UK's 10-year gilt declined to below 4.6%, marking its lowest point in over a week, as investors increasingly anticipate Bank of England interest rate reductions. This shift follows unexpectedly mild inflation figures and indications of economic pressure. In March, the Consumer Price Index (CPI) decelerated to a 2.6% year-on-year increase, falling short of forecasts, while monthly inflation dropped to 0.3%. Core services inflation, a key metric for the Bank of England, slightly decreased to 4.7%, continuing a two-month downward trend and providing some relief to households facing significant bill increases in April. Additionally, UK businesses reduced their workforce by over 78,000 in March—the largest reduction since the pandemic—as they brace for increased payroll taxes and higher minimum wage expenses. This combination of data has strengthened the expectation that the Bank of England might lower rates sooner to bolster economic activity. Traders are now projecting 86 basis points of rate cuts by the end of the year, with more than a 50% probability of a fourth quarter-point cut occurring in December.