A 1.5 million gamble for a profit of 20 million! Will the "ignore inflation" interest rate bet spread from Great Britain to the United States?

A small group of radical traders in the UK options market are making big bets, gambling that if the Bank of England ignores the inflation rate which has risen to an 18-month high and implements further interest rate cuts beyond current market pricing, the return on their huge bets could be over 1000%. If the Bank of England lowers its benchmark interest rate to 3.5% this year, the bets tied to the average rate of the Sterling Overnight Index Average (SONIA) could result in a payout of nearly 20 million from an initial outlay of around 1.5 million. The current Bank of England policy rate is 4.25%, and policymakers need to lower it to at least 3.75% for these radical betting traders to avoid huge losses. On Thursday, the market bought options strategies tied to SONIA, which is considered a barometer for the UK's benchmark policy rate. If the benchmark rate falls to 3.5% by the end of the year (25 basis points lower than the current implied level in the money market), these positions could bring super profits of nearly 20 million from an initial cost of around 1.5 million. These bets could yield exceptionally high returns because they go against the market expectations. After stronger than expected UK inflation and wage growth data were released this week, the market significantly lowered its expectations for the Bank of England's monetary policy easing measures. The forward contracts tied to the meeting dates no longer indicate three more rate cuts this year, as there was still a 20% possibility of this happening earlier in the week. In May this year, there was a similar "reckless bet", with the target rate set at 3.25%. Despite the latest inflation data being unexpectedly high, Bank of England Governor Andrew Bailey's earlier comments this week still gave the market hope for radical rate cuts. He hinted that if the UK labor market deteriorates faster than the Bank of England predicts, the policy rate could be significantly lowered. To avoid any of these traders suffering large losses, the Bank of England needs to lower the benchmark rate to at least 3.75%. Options trading traditionally takes place anonymously, making it difficult to determine who or which institutions are behind it. Meanwhile, as the latest economic data shows tariff costs are transmitted to prices, US inflation concerns have spiked, leading to a significant cooling of rate cut bets. However, some analysts believe that as SONIA options turn into a gambling game, traders' daring bets on the Bank of England's "ignore inflation" aggressive rate cuts could spread to US bond futures and interest rate futures markets. Industry analysts are concerned that the signal of the traders betting on the Bank of England's "ignore inflation" rate cuts could lead to more "irrational" pricing of rate cuts in the US interest rate futures markets, potentially shifting the market's focus towards anchoring the labor market to price the Fed's rate cut path rather than core CPI and PCE inflation. Traders have significantly lowered the probability of the Fed cutting rates twice this year to 75%, while a week ago the market was still fully pricing in a half-point rate cut space, and even once fully pricing in three rate cuts totaling 75 basis points this year. The "CME FedWatch Tool" shows that interest rate futures traders are generally inclined to believe that the Fed could cut rates as early as September and is more likely to act in October (with a probability of over 50%), betting that the Fed may cut rates only once this year, possibly by 25 or 50 basis points, rather than the previously expected three rate cuts totaling 75 basis points before July.