BOE’s Bailey: UK market curve rise due to risk premia, not rate hike expectations

Bank of England Governor Andrew Bailey has commented that the current upward trend in the UK market curve can be attributed partially to risk premia rather than anticipated interest rate hikes. Bailey’s remarks suggest that the present level of policy restrictiveness is generally suitable. This comes as the Bank of England maintains its bank rate at 3.75%, with inflation still above the target at 3.5% year over year. The upward movement in gilt yields reflects the market’s compensation for bond-market risk, rather than a direct prediction of future rate changes. Market participants will closely follow any further comments from the Bank of England regarding interest rate policy and inflation targets.

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