The UK 10-year gilt yield fell to 4.48%, the lowest in more than three weeks, as market expectations for further monetary easing moderated.
The Bank of England cut its main rate by 25 basis points to 3.75% in December, in a narrow 5-4 vote reflecting ongoing inflation concerns.
While headline inflation eased to 3.2% in November, it remains above the BoE’s 2% target, prompting Governor Andrew Bailey to signal that rates may decline further but likely at a gradual pace.
UK GDP rose 0.1% in Q3, aligning with forecasts, though the BoE expects flat growth in Q4.
Traders continue to anticipate at least one additional rate cut in the first half of next year.