Sept 19 (Askume) – Britain’s benchmark stock index closed higher on Thursday after the Bank of England kept interest rates steady and extended its bond reduction programme by a year, as widely expected.
The blue-chip FTSE 100 index (.FTSE) rose 0.9% and the mid-cap index (.FTMC) gained 1.6%. Both indexes hit their highest levels in more than two weeks.
Bank of England policymakers voted 8–1 to keep the benchmark interest rate at 5% , although Governor Andrew Bailey said easing inflation pressures meant the Bank of England would be able to gradually cut interest rates in the coming months.
Michael Brown, senior research strategist at Pepperstone, said: “The committee emphasised that a relatively patient approach to further normalisation is necessary given the relatively persistent underlying price pressures in the UK economy.”
They also voted to reduce the central bank’s stock of British government bonds by 100 billion pounds over the coming year.
Following the decision, the pound rose to its highest level since March 2022.
Bank of England policymakers are grappling with rising inflation after easing policy in August. A report on Wednesday showed that the pace of inflation in the services sector has accelerated.
UK US interest rates are now expected to fall more slowly than in the eurozone and the US. The Federal Reserve on Wednesday cut interest rates by 50 basis points above normal , with Chairman Jerome Powell saying this is needed to reduce inflation and support the labour market.
UK shares have lagged developed markets, with the FTSE 100 up 7.7% so far this year, while the S&P 500 (.SPX) has gained 19.8% and the Stoxx 600 (.STOXX) has gained 8.9%.
Most FTSE industry indexes were higher, led by Aerospace & Defence (.FTNMX502010) , which rose 3.6%.
Among individual stocks, online grocery company Ocado (OCDO.L) rose 2.8% after Ocado Retail raised its forecast for 2023-2024 .
S4 Capital (SFOR.L) fell 5.9% after it lowered its revenue forecast due to weak demand from technology clients .
