European Gilts outperform UK counterparts

Following hard-line comments from Bank of England governor Mervyn King, UK Gilts issues failed to outperform their European counterparts today.

King stressed that the UK economy was weaker than expected but was careful to stray away from implications of the slowdown.

Presenting his speech to the Confederation of British Industry, King also stressed the recent overshoot in CPI inflation and that the task of the Monetary Policy Committee shouldn’t be to stabilise output.

Citigroup economist Mike Saunders said, “His speech sounded very much like a call for no change in base rates, and a pre-emptive strike against those who might argue for a cut at the upcoming November MPC meeting.”

Regardless of King’s speech, the general market consensus is that the MPC is likely to cut interest rates in November, rather than place them on hold.

Date: 14.10.05