UK Stocks Rise as Inflation Falls, Bank of England May End Interest Rate Hikes
UK stocks saw a boost on Wednesday following a surprising drop in inflation in August. This news has raised hopes that the Bank of England (BoE) may be nearing the end of its interest rate hiking cycle. The FTSE 100, which comprises many exporters, rose 0.6% by 0705 GMT, while the sterling weakened 0.4% against the U.S. dollar, hitting its lowest levels since May.
According to data released, Britain’s annual consumer price inflation (CPI) unexpectedly fell to 6.7% last month from 6.8% in July. This defied expectations as economists polled by Reuters had forecasted that CPI would rise to 7.0%. The unexpected drop in inflation has led to speculation that the BoE may not need to further raise interest rates.
Money markets are currently predicting a 53% chance of the BoE increasing interest rates by 25 basis points to 5.5% on Thursday. However, many economists believe that this could be the final move in the central bank’s tightening cycle. The news of potentially reaching the end of the interest rate hikes has had a positive impact on rate-sensitive homebuilder stocks, which jumped 4.2% and led sectoral gains.
In other news, insurer M&G saw a 3.3% increase in its stock value after posting a better-than-expected 31% rise in its first-half operating profit. This positive performance further added to the overall optimism in the market.
The drop in inflation and the potential end to interest rate hikes by the BoE have provided a much-needed boost to the UK stock market. Investors and traders are hopeful that these developments will lead to a more stable and favorable economic environment. However, it is important to note that uncertainties still remain, and the market will continue to closely monitor the actions and decisions of the central bank.
The Bank of England’s Monetary Policy Committee is set to announce its decision on interest rates on Thursday. This decision will be watched closely by market participants and the general public alike, as it will have a significant impact on the economic outlook of the country.
Overall, the market remains cautiously optimistic, with hopes that the UK economy will continue to show signs of resilience and recovery. The next few days will undoubtedly bring further clarity regarding the future trajectory of interest rates in the country.
More detail via Investing.com UK here… ( Image via Investing.com UK )