FTSE 100 remains in the green after Bank of England holds rates
The FTSE 100 remained firmly in the green on Thursday after the Fed’s bumper rate cut last night, despite taking a slight hit in the aftermath of the Bank of England’s interest rate announcement.
Policymakers at Threadneedle Street decided to leave interest rates at five per cent, although Andrew Bailey suggested that there might be further rate cuts to come.
Shortly after midday London’s blue-chip index was trading 0.96 per cent higher at 8,332.72, having been up as much as 1.40 per cent before the rate decision was announced. The FTSE 250, meanwhile, was up 1.13 per cent up on the day.
Markets around Europe were firmly in the green on Thursday after the Fed cut interest rates by 50 basis points last night, the first rate cut since the pandemic.
In the run up to the decision, traders had been concerned that the Fed had waited too long to cut interest rates, causing unnecessary damage to the US economy.
However, forecasts released alongside the rate decision—the so-called ‘dot-plot’ charts—showed the labour market was expected to remain relatively solid even while inflation returned to the two per cent target.
Kathleen Brooks, research director at XTB, said the Fed’s decision was a “precautionary move” to ensure the US did not face a larger than necessary downturn.
“The labour market is actually in solid condition, and our intention with our policy move today is to keep it there. To me, the logic of this — both from an economic standpoint and also from a risk-management standpoint — was clear,” Jerome Powell, chair of the Fed, said after the decision.
Despite the large cut, US equities actually closed a bit lower yesterday. The S&P 500 fell 0.29 per cent while the Nasdaq lost 0.31 per cent.
However, Asian markets posted solid overnight gains, with both the Nikkei and the Hang Seng gaining over two per cent.