Investors have brought forward the date at which they expect the European Central Bank and Bank of England to begin cutting interest rates after a flurry of data suggesting the eurozone and the UK are headed for a period of near-stagnation.
Along with the US Federal Reserve, both central banks opted to leave rates unchanged at their latest policy meetings, emboldened by slowing inflation and wary that previous rounds of monetary tightening take time to weigh on consumer demand and economic growth.
But policymakers were also careful to warn that the battle to tame inflation is far from over, with ECB president Christine Lagarde warning it was “totally premature” to consider rate cuts. The comments were later echoed by Bank of England governor Andrew Bailey, who added that “upside risks” to inflation remained.