London investors are not fully pricing in a quarter‑point rate increase by the Bank of England until its February 2027 meeting, according to market data released Thursday. Bond yields continued a gradual decline after a brief pause on Wednesday.

Market pricing shows limited near‑term tightening

LSEG data show that 24.3 basis points of rate hikes were priced in by the time of the BoE’s December 17 announcement, down from over 25 basis points for most of August. By the February 4 meeting, the market had priced in 36 basis points of increase.

For the upcoming September 17 meeting, less than 4 basis points of tightening are priced in, implying roughly a 15% probability of a hike. By comparison, the European Central Bank has about 24 basis points of tightening priced in for its September 10 decision.

Bond yields and inflation backdrop

British 10‑year government bond yields slipped 2 basis points on Thursday to 5.01% at 07:52 GMT, hovering near a two‑week low of 4.979% recorded on Wednesday before a later rise.

Recent data show British inflation at 2.9% in July, driven by higher household energy costs, while the labour market remains subdued – a key factor for the Monetary Policy Committee’s longer‑term inflation outlook.

Global influences and upcoming events

Investors are also watching what Federal Reserve Chair Kevin Warsh will say at the annual Jackson Hole gathering of central bankers on Friday, as U.S. policy can affect global financial conditions.

BoE Governor Andrew Bailey noted that market expectations reflect concerns about the potential escalation of the U.S.–Iran conflict, which could influence monetary policy decisions.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.