The UK’s benchmark government borrowing rate touched a historic low of 1.396 per cent on Thursday, as the ripple effects of central bank action in the face of low inflation spread worldwide.

Tumbling oil and food prices in the UK and indications from the Bank of England that it has no plans to raise interest rates in the near future have weighed heavily on the country’s 10-year borrowing costs in recent months.

The European Central Bank’s plan to purchase euro zone government bonds has pushed German Bunds even lower, increasing demand for high quality assets outside the euro zone such as gilts, pushing down those yields as well. As a result, the yield on UK 10-year gilts fell by nearly half a percentage point morning to the lowest rate in UK history. Longer term 30-year gilt yields, considered particularly reflective of the country’s inflation prospects, also dropped to a record low of 2.102 per cent.

Sluggish global inflation and concerns about growth have led to similar falls in government borrowing costs around the world. – Copyright The Financial Times Limited 2015