Pound and gilt yields slide following dovish Bank of England interest rate vote

The Bank of England BOE held interest rates steady on February 5, 2026, in a decision marked by a surprisingly narrow vote. In its forward guidance, the central bank stated that it expected a future interest rate cut if inflation continued to slow. This completed action has significantly shifted market expectations regarding the United Kingdom GB interest-rate path, immediately impacting the national currency and government debt yields.

Following the announcement, Sterling (British pound) GBP fell to a near two-week low as market participants adjusted to the new guidance. In the fixed-income sector, yields on UK short-dated two-year gilts GB2Y dropped to a three-week low. The policy shift also affected UK 10-year gilts GB10Y, as the narrowness of the vote and the Bank of England BOE's commentary provided a fresh signal to investors about the potential for near-term changes in borrowing costs.