London’s FTSE 100 hits new high after BoE signals rate cuts

Britain’s FTSE 100 scaled a record high on Thursday after the Bank of England kept interest rates unchanged but investors cheered increasing indications that more policymakers are warming up to cutting borrowing costs soon.

The benchmark FTSE 100 index rose 0.4% to 8,390.76 points, hitting a new peak, while the mid-cap FTSE 250 reversed course to gain 0.2%.

The pound slipped against the U.S. dollar and was last at $1.2458. The UK’s benchmark 10-year gilt yield fell marginally and was trading at 4.15%.

The BoE said on Thursday its Monetary Policy Committee voted 7-2 to keep rates at a 16-year high of 5.25% after Deputy Governor Dave Ramsden joined Swati Dhingra in voting for a cut to 5%.

The central bank added a line to its post-meeting statement, saying it would be watching the next rounds of economic data closely. Money markets now see a 77% chance that BoE will cut interest rates in August, compared with 72% before the rate decision. “It doesn’t really matter if it’s going to be June or August for the BOE, as long as we know that the worst that the BOE will do is to keep interest rate at current level and not hike,” said Julien Lafargue, chief market strategist at Barclays Private Bank. Rate-sensitive homebuilders spiked higher, advancing 0.7%, while energy shares gave a 1.2% boost as oil prices gained due falling U.S. crude inventories and an increase in Chinese imports last month.

HSBC Holdings was the biggest drag on FTSE 100 as it traded ex-dividend. Most other big banks listed on the benchmark index were trading higher.

3i Group was one of the bottom performers, falling 4.2% after posting full-year results.

BAE Systems rose 1.1% after the defence firm said it was on track to meet guidance for higher earnings and forecast a “further positive momentum”.