London close: FTSE 100 retreats from record high as BoE holds rates steady
UK stocks closed lower on Thursday as investors took profits following a recent rally, influenced by the Bank of England's decision to keep interest rates unchanged and ongoing concerns about economic growth.
Markets experienced significant declines in Frankfurt and Paris, compounded by a weak start on Wall Street, which further dampened investor sentiment in the afternoon trading hours.
Market overview
The FTSE 100 declined by 0.4%, ending the day at 9,735.78 points. It pulled back from a new record high of 9,777.08 achieved on Wednesday. This retreat was due to strong gains in banking, mining, and retail sectors being offset by sharp falls in blue-chip stocks such as Hikma, Smith & Nephew, Diageo, and Convatec.
Bank of England decision
The Monetary Policy Committee’s meeting was central to the session. The BoE voted 5-4 to keep borrowing costs at 4%, breaking the pattern of rate cuts at every other meeting.
“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.”
Economic context
Despite sluggish economic growth, the BoE continues to grapple with persistent inflation, with the consumer price index currently at 3.8%, still well above the long-term target of 2%.
Author's summary: The FTSE 100 fell from a record high as the Bank of England kept rates steady amidst concerns of inflation and economic slowdown, with potential for rate cuts in December dependent on future data.