An investment bank has indicated that interest rates might be reduced starting in May, as bond yields have started to relax before the Bank of England’s upcoming interest rate decision.
There’s been a slight decrease in the cost of government borrowing, with the yield on 10-year benchmark bonds, also known as gilts, dipping to 3.89pc.
In the UK, yields, which have an inverse relationship with prices, have dropped by 12 basis points in the past week, though they have risen by 36 basis points over the past month. These bond yields are often viewed as predictors of future interest rate movements.
Mohit Kumar, the chief European economist at Jefferies, commented on the upcoming interest rate decision by the Bank of England:
No change in policy is anticipated. An 8-1 vote is expected in favour of maintaining the current rate, with one member possibly voting for a reduction.
A dovish tone is anticipated at the press conference. The Bank of England is likely to express some satisfaction with the progress towards reducing inflation, though it might be premature to declare a complete victory over inflation.
The Governor is expected to maintain a data-dependent approach to policy actions and remain flexible regarding the timing of any rate cuts.
With a bullish stance on gilts going into the meeting, if inflation continues to decrease, there’s a potential for a rate cut in May.
