Higher risk premia on sterling-denominated assets, which coincided with last September’s disastrous “mini-budget”, have typically long since evaporated. The recent increase in Gilt yields – to levels last seen around the time of that ill-fated experiment – has instead reflected the stubbornness of “core” inflation and the resilience of economic output in the UK. Those developments have led us to conclude that Bank Rate will peak above the level that we had previously anticipated. We have also revised up our forecasts for the 10-year Gilt yield.
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