LONDON (Reuters) -Investors added to their bets on Bank of England interest rate cuts at the end of this year after data on Wednesday showed Britain’s consumer price inflation and a key underlying measure of price growth unexpectedly held steady in September.
Interest rate futures were pricing a roughly 75% chance that the BoE’s Monetary Policy Committee will cut Bank Rate to 3.75% from 4% at its December meeting, up from about 46% before the inflation data. They were fully pricing in a 25 basis-point cut in February 2026, a month earlier than before the figures were published.
Two-year gilt yields were down by 8 basis points at 3.769% in early trade, the lowest since May 2. The 10-year gilt yield hit its lowest since April 7, also down about 8 bps at 4.393%.
“Widespread downside surprises across the CPI components makes this a significant release for the MPC and raises the chance of a December interest rate cut,” Rob Wood, chief UK economist at Pantheon Macroeconomics, said.
“We still think the MPC will skip November – the growth data and stabilising jobs suggest they can afford to wait still – and the November 26 budget also seems worth waiting for, as well as another round of inflation data.”
Markets are now pricing in about 66 basis points of BoE rate cuts by December 2026, or nearly three quarter-point reductions, compared with about 57 basis points before the inflation data.
(Reporting by Suban AbdullaEditing by William Schomberg)
