LONDON (Reuters) - UK derivatives markets moved on Tuesday to price in a marginal chance of a cut in Bank of England interest rates in the next six months, a reflection of this month’s growing gloom over the outlook for the global economy and sterling.
Small 1-2 basis point moves in interest rate futures SONIA and short sterling derivatives <0#FSS:> pushed both into cut territory as BoE Governor Mark Carney reiterated in parliament the conditions were not in place for a hike in rates yet.
Answering questions at an event last week, Carney said the bank’s most recent rate decision had been about whether to tighten not loosen policy and dealers said the market was still positioned for the first fully priced move to be a rise in rates.
“The market is pricing in a small chance of a cut over the next six months,” said a dealer with one international bank in London.
“It is a really small chance. I would say it is still more that (people think rates will be) on hold for a long time than anything else. The next fully-priced move is a rate hike next year.”
Writing by Patrick Graham, editing by Nigel Stephenson