The UK’s benchmark stock indexes ended higher on Thursday, after the Bank of England kept rates on hold, as widely expected, and extended its bond reduction plan for another year.
The blue-chip FTSE 100 was up 0.9%, while the mid-caps gained 1.6%. Both indexes touched their highest levels in over two weeks.
BoE policymakers voted 8-1 to keep benchmark rates on hold at 5%, though Governor Andrew Bailey said cooling inflation pressure meant the BoE should be able to cut interest rates gradually over the months ahead.
“The Committee stressed a relatively patient approach towards further normalisation, which remains warranted given the relatively persistent nature of underlying price pressures within the UK economy,” said Michael Brown, senior research strategist at Pepperstone.
They also voted to run down the bank’s stock of British government bonds by another 100 billion pounds over the coming year.
The British pound touched its highest since March 2022 after the decision.
After easing policy in August, BoE policymakers continued to grapple with rising inflation. A report on Wednesday showed a quickening pace of inflation in the services sector.
UK rates are now expected to come down at a slower pace than in the euro zone and the United States. The Fed eased interest rates by a larger-than-usual 50 basis points on Wednesday, with Chair Jerome Powell citing easing inflation and a need to support the labour market. [MKTS/GLOB]
UK stocks continue to lag developed market counterparts, with the FTSE 100 up 7.7% year to date versus the S&P 500’s 19.8% and the STOXX 600’s 8.9% gains.
Most FTSE sector indexes were trading higher, with aerospace and defence leading with gains of 3.6%.
Among individual stocks, online grocer Ocado advanced 2.8% after Ocado Retail lifted its forecast for 2023-2024 year.
S4 Capital fell 5.9% after the ad group downgraded its revenue forecast on weakness in demand from its tech clients.
(Reporting by Khushi Singh, Lisa Mattackal）
