London’s stocks and bonds rallied yesterday as the first dose of encouraging inflation data this year generated a new optimism among investors and calmed fears about future aggressive interest rate rises.
Government borrowing costs, as reflected by the yield on UK gilts, fell dramatically and share prices rose after annual consumer prices inflation fell in June to a 13-month low of 7.9 per cent.
The decline in inflationary pressures comes after weeks of angst about the state of the economy and stubbornly high prices, which have forced money markets to increase their interest rate expectations, throwing the mortgage market into turmoil. Yesterday, however, money markets relaxed their forecasts for peak interest rates from an earlier projection of 6.2 per cent to 5.75 per cent, implying
Enjoy unlimited digital access. £1 for 6 months.
Already a subscriber? Log in