All UK rate hike bets are off

ALL RATE HIKE BETS ARE OFF

Pound sterling is the weakest currency in the world today and we have seen a pretty big gilt rally, with 10-year gilt yields rallying 7 basis points to 3.1% at the time of writing, the lowest yield in seven months.

The trigger was the minutes from the last Monetary Policy Committee meeting, where the crucial sentences were "current weakness of demand growth was likely to persist for longer than previously thought" and "further asset purchases might become warranted if the downside risks to medium-term inflation materialised." The markets are now pricing in a first rate hike in the UK for August 2012, which is quite incredible if you consider back in January when I wrote this comment, the markets were pricing in three 0.25% rate hikes this year alone. The chart shows just how violent things have ...