Interest rates on British debt continue to rise. Near 4.8% for the 10-year rate, they reached 5.6% for the 30-year, the highest level since nearly three decades.
The country is in a difficult situation. The economy slowed down again in the 2nd quarter, no longer exceeding 0.3% compared to the previous quarter.
At the same time, inflation continues to rise. Driven by the price of transport (especially by air), the hospitality sector, and food, the inflation rate reached 3.8% for July.
Limited possibilities for The Bank of England
London is therefore facing a stagflation scenario, which is complicated to manage in many respects.
The Bank of England would like to cut its key rates further to stimulate demand, but in the face of the rebound in prices, the room for manoeuvre of monetary policy is minimal. Faced with soaring interest rates, it is slowing down the pace at which it is getting rid of its holdings of British sovereign debt, in an attempt to stabilise this market.
There is also little room for manoeuvre on the fiscal and fiscal policy front. The difficult outcomes for the occupiers of Downing Street are coming up against Prime Minister Keir Starmer's campaign promises.
Investors are not confident
Against this unpromising economic situation, investors are showing mistrust of the United Kingdom.
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The UK yield curve
The economic and financial situation in the United Kingdom is increasingly worrying investors, who are demanding ever higher returns to ensure the financing of the country.