ING Bank: Political tensions and high oil prices push up UK interest rate expectations

Golden Ten Data reported on May 12 that UK 2-year government bond yields have risen. ING strategists stated in a report that this is mainly due to political tensions and high oil prices, leading investors to increasingly believe that the Bank of England will have limited room to cut rates in the coming years. They pointed out that this shift is also related to market expectations: if Starmer steps down, fiscal spending may expand and government debt could rise under new leadership, further pushing up rate expectations. UK Prime Minister Starmer is currently facing significant pressure to resign after the Labour Party performed poorly in last week’s local elections. Currently, the UK money market has started to price in the likelihood of two to three rate hikes by 2026 due to persistent inflation.