The yield on the UK’s 10-year gilt fell to 4.65%, retreating further from its recent peak of 4.9%, as weaker-than-expected retail sales in December reinforced expectations for aggressive monetary easing by the Bank of England. Official data showed a 0.3% monthly decline in retail sales, defying forecasts of a 0.4% increase. This marked the latest in a string of disappointing economic indicators, including GDP growth of just 0.1% in November, below expectations of 0.2%, and stagnation in the three months to November. In response, traders now anticipate three rate cuts from the BoE this year, up from just one expected earlier this week, as the central bank faces mounting pressure to stimulate the economy. Inflation also eased to 2.5% in December, in line with BoE projections but below market expectations, adding to the case for rate cuts. Meanwhile, concerns persist over the UK’s debt levels and the government’s ability to manage public finances effectively.
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