London Close: FTSE 100 Falls From Record High as BoE Holds Rates
UK stocks closed lower on Thursday as investors took profits after a recent rally amid the Bank of England's interest rate decision and ongoing worries about economic growth. Losses in Frankfurt and Paris, along with a weak Wall Street open, dampened market sentiment during afternoon trading.
The FTSE 100 dropped 0.4% to 9,735.78, retreating after hitting a record high of 9,777.08 on Wednesday. Gains in banks, miners, and retailers were offset by significant declines among blue-chip stocks Hikma, Smith & Nephew, Diageo, and Convatec.
Bank of England's Interest Rate Decision
The Monetary Policy Committee voted 5-4 to keep the borrowing cost at 4%, breaking its usual pattern of cutting rates every other meeting. Despite sluggish economic growth, the BoE continues to face persistent inflation pressures. The consumer price index is at 3.8%, down from recent highs but still above the Bank's 2% target.
“Today’s decision clearly opens the door to a December cut, but that remains contingent on the incoming data," said Matt Swannell, chief economic advisor to the EY ITEM Club.
“If there are further signs of falling inflationary pressures in the coming months and if the bulk of the tax rises expected at the Autumn Budget are introduced almost immediately, then there might be a slim majority on the Committee in favour of a Christmas cut."
Market Impact and Outlook
- FTSE 100 retreated slightly after reaching a new record high the previous day.
- Economic growth remains slow, while inflation stays stubbornly above the target.
- The possibility of a rate cut in December depends on future inflation trends and fiscal policy implementation.
Author’s summary: The FTSE 100 fell after a record high as the Bank of England kept rates steady, signaling a possible cut in December if inflation eases and tax rises are promptly enacted.