Sterling and gilts were little changed after last week’s Autumn Budget, with no abrupt policy shifts and most measures already in prices. Fiscal headroom was rebuilt to levels seen as barely acceptable, while tax rises were modest and focused mainly on banks; energy support measures were small, leaving growth and inflation effects expected to be negligible.
Lingering Market Uncertainty and Policy Details
With markets broadly unfazed, uncertainty persists due to limited action on welfare spending and a lack of clarity on defence spending. Sterling has edged higher against the dollar and the euro ahead of Thursday’s Bank of England decision, where a rate rise is almost fully priced in given resilient growth and stubborn inflation.
Bank Of England Outlook And Market Expectations
Attention is likely to fall on the MPC vote split and forward guidance, rather than the increase itself, with expectations for a divided vote and open-ended messaging that stops short of committing to further tightening in 2027. Markets are pricing in three additional hikes after this week’s meeting, a path seen as aggressive, and the central bank is expected to lean against those expectations.
