NIESR Quarterly Term Premium Tracker - Will UK Markets See Turbulence Once the Bank Rate Peaks?

With the exception of a short spell of a rising term premium from 22 December to 10 January, possibly brought on by the statistical release of the November 2022 public sector finances, UK investors seem broadly confident in the path of UK short-term interest rates. [...] That said, the questions of how long the MPC should maintain the Bank Rate at its peak level and the pace at which to loosen remain contested. [...] In our Winter UK Economic Outlook, we noted that while there is little uncertainty surrounding the current monetary tightening cycle, the questions of how long the MPC should maintain the Bank Rate at its peak level and, once there, the pace at which to loosen remain contested. [...] In our Winter UK Economic Outlook, we noted that while there is little uncertainty surrounding the current monetary tightening cycle, the questions of how long the MPC should maintain the Bank Rate at its peak level and the pace at which to loosen remain contested. [...] Interestingly, we have observed a significant fall in the Greek term premium in the first quarter of 2023 from an average of 3.4 percentage points in the fourth quarter of 2022 to 2.7 percentage points.