UK 10-Year Gilt Yield Tumbles Despite Hot CPI Print

The yield on the UK 10-year gilt fell to 4.673% from a three-month high of 4.7456% on August 19, as investors digested the latest inflation data and the monetary policy outlook of major central banks.

July inflation came in hotter-than-expected at 3.8%, a level that tempered bets on further near-term rate cuts by the Bank of England.

Markets now see a 57% chance the Bank Rate will stay at 4% at December’s final 2025 meeting, while swaps suggest a roughly 75% probability of another cut to 3.5% by end-2026.

Elevated borrowing costs add pressure on Chancellor Rachel Reeves ahead of the autumn budget, which may require savings or tax hikes.

Investors are also eyeing the Jackson Hole symposium, where Fed Chair Powell’s comments on near-term rates will be closely watched.

US minutes showed officials remain more concerned about inflation than the labor market.

Meanwhile, the ECB is widely seen holding its policy rate at 2%, likely ending its recent easing cycle.