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THE BOE MAINTAINS ITS TIGHT MONETARY POLICY STANCE 3/3

23 Sep

THE BOE MAINTAINS ITS TIGHT MONETARY POLICY STANCE 3/3

Posted by BearBull Group In Macro Research Insights 0 comment

Driven by the combined effect of the Bank of England's continued restrictive monetary policy and persistent strength in U.S. Treasuries, the yield on the 10-year gilt rose to 5.21% in mid-September, up from 5.0% in May. Meanwhile, the 2-year gilt yield stands at 4.54%, reflecting market expectations that any significant monetary easing will be postponed until 2027. The yield spread between the 10-year gilt and the German Bund has widened to approximately +2.30 percentage points, underscoring the substantial inflation risk premium demanded by international investors on British sovereign debt.

Key Points

  • The ONS confirms growth of +0.4% in Q2 2026
  • Economy avoids contraction despite the shocks
  • Moderate recovery in services PMI
  • Labor market stabilizes at 4.9%
  • Gradual improvement in consumer sentiment
  • Headline CPI inflation picks up again to +3.1% in August
  • BoE maintains strict status quo (3.75%) in a split vote (6-3)
  • Persistent tensions on sovereign yields
  • Interest rate support for the British pound remains
  • Direct real estate stabilizes
  • “Value” profile protection against high interest rates
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