World’s Biggest Bank Shuns Labour’s Gilts27 Dec 2024 23:46
“ The world’s biggest bank is shunning British debt amid fears that Rachel Reeves has stoked inflation with record increases in the minimum wage and a £40bn tax raid.
JP Morgan Asset Management, which has $3.3 trillion (£2.6 trillion) of assets under management, including more than $750bn in bonds, said “big uncertainty” over the magnitude of next year’s wage increases and the impact on prices meant it was steering clear of UK gilts.
Seamus Mac Gorain, a managing director at the bank, said it was buying Spanish and Italian debt instead.
He said: “I think there’s a big uncertainty [about the UK]. We had a period of very high inflation, mainly due to energy prices. And that inflation passed through prices all around the economy, including service prices and wages.
“And now we’ve had a year where energy prices are a bit lower. What should happen is that next year, all these other prices, like services, wages, should come down.
The Bank of England held rates at 4.75pc in December. Investors now expect Threadneedle Street to cut rates just twice in 2025, compared with at least four times ahead of Ms Reeves’s maiden budget. The Bank cut rates twice in 2024. By contrast, the European Central Bank cut rates four times while the US Federal Reserve reduced rates three times.
Mr Mac Gorain said: “Other central banks have been easing policy more quickly than the Bank of England, and that makes sense, because they’ve seen a bit more progress on inflation.”