UK markets delivered a split-screen performance on July 30, 2026: the FTSE 100 reached a fresh record intraday high while gilt yields fell sharply after the Bank of England held Bank Rate at 3.75% and Governor Andrew Bailey explicitly pushed back against market pricing of imminent rate hikes.
Bank of England: Hold With Hawkish Undertones
The Monetary Policy Committee voted 6-3 to maintain Bank Rate at 3.75%, with three members voting for a 25-basis-point increase to 4.0%. The decision was more hawkish than the 7-2 split markets had expected, yet Bailey's press conference took a dovish turn. He told reporters: "I wouldn't want you to leave this room thinking the BoE is tilting toward rate hikes."
The BoE's July Monetary Policy Report noted that UK financial conditions have tightened materially since the Middle East conflict began, with longer-term gilt yields at their highest level since 2008. However, domestic inflationary pressures appear to be easing, giving the MPC room to wait for more data.
Gilt Market Reaction
Short-dated gilts rallied strongly. The two-year yield fell 11 basis points to 4.34%, its steepest one-day decline since mid-June. The 10-year yield dropped to around 4.99%, while the 30-year yield held near 5.73%. Money markets scaled back September hike expectations from nearly 60% to below 40%, and year-end tightening expectations fell from 38 to 32 basis points.
FTSE, Sterling, and Sector Impact
The FTSE 100 benefited from lower discount rates and a weaker pound, which boosts overseas-earning companies that dominate the index. Banks traded mixed: lower rate-hike expectations compress net interest margin expansion hopes but reduce credit-quality concerns. Property stocks gained as falling gilt yields reduce the discount rate applied to rental income streams.
Sterling fell from earlier highs above $1.34 as rate-differential expectations shifted. For crypto investors in the UK, the FCA's ongoing cryptoasset authorisation regime continues on schedule, with full authorisation required by October 2027. Lower gilt yields typically support risk assets, but the BoE's focus on inflation means the path for digital assets remains tied to global liquidity conditions. See our central-bank week analysis for the global context.