
Bank of England governor casts doubt on rates rise
The term premium reflects the relative riskiness of lending on the interbank market compared with the government repo market. The futures curve eased after George’s remarks, pricing-in a 5% rate for the end of the year, down from 5.2% prior to his speech.
But even if interest rates are less volatile, sectoral imbalances, policy failures in individual countries can still have wider repercussions, said George, adding, "I suspect you will have your work cut out in pricing and managing credit risk in your necessarily more diversified bond portfolios."
His comment implied that UK interest rates may not rise as sharply this year as traders previously anticipated. Minutes released today from the last Monetary Policy Committee meeting two weeks ago show that the decision to keep rates unchanged was not unanimous – two of the seven members had voted for a further 25 basis points cut.
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