Inflation is slowing down: the Bank of England is preparing to cut rates

December data on a slowdown in inflation in the UK led traders to predict a further reduction in interest rates by the Bank of England this year. This eased concerns about persistent price pressures that had previously undermined the position of British assets. 

The markets are now planning a 50 basis point rate cut (two 0.25% increments). This exceeds previous expectations of less than 40 basis points. As a result, British government bonds (Gilts) have strengthened against these forecasts. This partially offset the previous surge in yields, which had previously driven borrowing costs to multi-year highs, raising questions about the government's fiscal policy. 

However, the pressure on Chancellor Rachel Reeves remains. At the auction on Wednesday, the borrowing rate on 10-year bonds was 4.81%, the highest since 2008. 

Concerns are also raised about upcoming inflation data in the United States, which could trigger a new increase in yields on global markets, which would jeopardize current stability.