BoE’s Bailey: Market Curve Prices Further Tightening, Reflects Risk Premium

Bailey's distinction between market-implied tightening and actual rate expectations matters because it reframes the recent curve steepening as a risk premium tied to energy and geopolitics rather than a signal of the Bank's base case. That leaves the inflation path hostage to conflict developments, with the CPI peak itself conditional on a de-escalation that may not materialize. The open question is whether the risk premium compresses on positive headlines or hardens into a genuine repricing if energy risks persist.