According to Bloomberg, options traders expect more interest rate cuts to be delivered by the Bank of England (BoE) than the markets forecast. Their positions assume there might be three moves by the BoE to cut borrowing costs this year, each by a quarter of a point.
At the same time, as the agency notes, today's decision by regulator officials could be the most hawkish in recent months.
The first test for this forecast will come when British officials announce their monetary policy decision on Thursday. According to the median forecast reported by Bloomberg, the committee will keep interest rates at 4.5%. The regulator may also voice concerns about rising inflation, despite the contraction of the British economy earlier this year.
Meanwhile, money market participants are cutting expectations for a rate cut by the Bank of England this year. The anticipated increase in European defense and infrastructure spending may accelerate GDP growth and inflation.