Institutions: The Central Bank of the United Kingdom is in a dilemma, and rapid policy relaxation may affect the stability of the bond market.

On February 6, Jin Shi Data News, Anthony Karaminas, Deputy Head of SEI’s Global Fixed Income Advisory Business, said that the current “stagflation” situation in the UK (stagnant economy plus inflation higher than the target) presents a challenge to the UK’s Central Bank because it needs to support economic activity while adhering to its clear inflation control task. Looking ahead, stubborn inflation may limit the ability of UK Central Bank Governor Bailey to further cut interest rates. If the Central Bank continues to quickly relax its policies, the UK government bond market may suffer from significantly increased term premiums and reputation losses. This will limit the government’s space to boost the economy through expenditure when needed.