MediumIV Macro Policy & Sovereign Debt29 September 2026, Tuesday
BoE's Ramsden opens the door to a hike as markets price November
The UK 10-year government bond (gilt) yield rose 2 basis points to 5.42% on 29 September and is trading close to its highest level since July 2007. BoE Deputy Governor Dave Ramsden kept the possibility of a hike open on 28 September; the market puts the probability of a November hike at 85%.
Trading Economics data show the UK 10-year yield rose to 5.42% on 29 September; it is up 27 basis points over the past month and 72 over the past year. According to the same source, the market prices an 85% probability of a 25 basis point hike at the Bank of England's (BoE) November meeting. The source says about 4 hikes are priced in by mid-2027. The BoE held its policy rate at 3.75% at its last decision, and annual inflation was 3.1% in August.
FXStreet reported on 28 September that Ramsden said in a speech in London that the risks to the inflation outlook were increasingly tilted to the upside. Ramsden said that if upside pressures persist, 1 case could emerge for raising the policy rate, and he ruled out monetary easing in the near term. According to the same report, Ramsden listed energy prices, weather conditions and the artificial intelligence supply chain as external risks. Sterling gained 0.21% against the dollar on the day of the speech to trade around 1.3250.
Talay assessment
Bottom line
Successive warnings from the BoE's leadership have led the market to price a November hike as all but certain. The gilt yield holding at 5.42% shows the UK's borrowing costs are rising along with those of the US and narrowing the room for fiscal policy. Unless energy prices retreat, the most likely path is for the BoE to move to tightening.
Likely effects
- UK public financesNegative1–6 months
The 10-year yield rising to 5.42% increases the Treasury's interest bill and creates pressure on taxes or spending to comply with the fiscal rules.
- Housing and creditNegative1–6 months
Pricing of about 4 hikes raises fixed-rate mortgage rates and slows household demand.
- SterlingPositiveWeeks
Expectations of a hike support sterling; the interest rate differential keeps UK assets attractive to foreign investors.
Possibilities, ranked
- 1Hike in November65%
Inflation stays tilted to the upside, and the BoE raises rates by 25 basis points in November.
Watch: UK September inflation data in mid-October and speeches by MPC members
- 2Wait and see25%
Energy prices calm, and the BoE holds in November and postpones the hike.
Watch: The Brent price and UK wage growth data
- 3Gilt stress10%
The yield rises quickly above 5.6%, and the BoE and the Treasury are forced to act to keep the market functioning.
Watch: The bid-to-cover ratio at longer-dated gilt auctions
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- UK 10-year yield▲ 5.42%
- November hike probability▲ 85%
- GBP/USD, 28 September▲ +0.21%