UK Market Monitor Q1 2024

Real and nominal Gilt yields both increased over the quarter. Real yields averaged an increase of circa 15 bps, while nominal yields increased by circa 30bps. This led to a commensurately higher break-even inflation rate.

Inflation prints continued to decline over the quarter following the trend of the previous quarter. The YoY RPI rate at the end of March was 4.3%, while the CPI rate was 3.2%. Over the quarter the market lowered its expectation for the number of Bank of England base rate cuts in 2024. This is due to the receding probability of rates being cut by the US Federal reserve. However, we anticipate that UK rate cuts are still likely this year as inflation returns closer to target.

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