Short-dated UK government bonds, known as gilts, surged after the Bank of England decided to maintain its interest rate at 3.75%. UK inflation fell to 2.6% in June from 2.8% in May, leading markets to reduce expectations for a near-term rate hike. The Bank of England’s decision to hold rates, combined with signs of easing inflation, suggests a potential shift in monetary policy expectations. Market participants are now adjusting their outlook, believing the BoE may not proceed with further rate increases in the immediate future.
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