Bank of England pricing idiosyncratic ahead of British budget

So why would markets see little from the BoE this year but a lot between November and the middle of 2027? Tukker believes it is down to expectations of the October budget, the first by new Prime Minister Andy Burnham's chancellor John Healey.

"At the moment if nothing changes the Bank of England can keep on hold, and the budget won't have much of an impact on inflation for the remainder of this year, but it could have a big impact next year," he said.

Burnham and Healey face a similar problem to their predecessors – few levers to raise funds for a policy agenda which hopes to tackle some expensive areas such as the provision of social care to the elderly.

Healey has said he will honour the fiscal rules, which include a pledge to balance day-to-day spending with tax revenues by the end of the decade. But both have hinted at using the "flexibility" within them.

"It's not so much about fiscal credibility," Tukker says, "there's not that fear that Burnham might throw that away and start spending more than he's allowed to, because then you'd see significant steepening of the yield curve."

"It's more the fear that inflation will pick up next year on the back of increased spending."

We're seeing some big moves in market pricing of central banks' policy paths, but Michiel Tukker, senior rates strategist, points out how market expectations for the Bank of England are a bit out of sync.

The BoE has been on hold all year, albeit at fairly restrictive levels. Markets expect it to be on hold when it meets later this month, but then a 25 basis point hike in November is close to being fully priced according to LSEG data, and two more such moves by the middle of next year.

In contrast the European Central Bank has hiked once, and is set to do so again next week, from fairly low levels, while markets see a good chance of a Federal Reserve rate hike this month.