Leading Indicators | Will US tariff measures drive disinflationary pressures in the UK?
2 minutes to read
To receive this regular update straight to your inbox every Tuesday, subscribe here.
Here we look at the leading indicators in the world of economics.
Download the dashboard for in-depth analysis into commodities, trade, equities and more.
Demand shock from tariffs supports lower inflation and rate cuts
Weaker global demand, partly driven by higher US tariffs, is contributing to a negative demand shock that may help ease inflationary pressures in the UK. According to Oxford Economics, this external headwind, alongside a stronger pound and lower oil and gas prices, has prompted a downward revision in near-term inflation forecasts. Against this softer macro backdrop, the case for monetary easing has strengthened, with markets now pricing in three 25bps cuts from the Bank of England, bringing the bank rate down to 3.75% by year-end.
Gilt yields settle after volatility, though uncertainty remains
UK gilt yields have moderated after a period of sharp volatility earlier this month. The 10-year gilt yield has fallen to around 4.50%, down from a peak of 4.75% earlier this month, while the 30-year yield - previously at its highest level since 1998, has also eased. This stabilisation reflects improved investor sentiment, supported in part by the UK Debt Management Office’s decision to reduce long-dated gilt issuance in the 2025–26 fiscal year, alleviating concerns over supply pressures.
UK pension funds encouraged to back domestic private markets
The UK government is encouraging pension funds to allocate 10% of their assets to private markets by 2030, with at least half of that directed towards domestic investments. The initiative aims to stimulate economic growth, support job creation, and enhance pension returns by channelling capital into UK businesses and infrastructure. Compared to countries like Canada and Australia, UK funds invest far less domestically. If voluntary action fails, regulatory pressure may follow.
Download the dashboard here
Subscribe for more
Get exclusive market analysis, news and data from our research team, straight to your inbox.
Subscribe here