(Reuters) – UK stocks fell on Thursday, weighed down by bank stocks, as the Bank of England kept interest rates unchanged but warned against assumptions that it would cut rates further in the coming meetings amid global economic uncertainties.
The blue-chip FTSE 100 was down 0.3%, while the domestically focused FTSE 250 index fell 0.2%.
The BoE held interest rates at 4.5%, as expected, and noted the escalation of global trade tensions kicked off by the United States. Only one out of the 9 members of the Monetary Policy Committee voted for a quarter-point rate cut.
“The Bank has a very challenging economic environment with growth having slowed but inflation pressures remaining elevated,” said Luke Bartholomew, deputy chief economist at Aberdeen.
“This will keep the Bank on its ‘gradual and careful’ cutting path for now, with another cut likely in May.”
Traders pared back their bets on BoE rate cuts slightly, expecting 51 basis points reduction by the end of 2025 from 54 bps before the announcement.
Earlier in the day, data showed the pace of British pay growth was little changed in the three months to January, in contrast with warnings of a hit to hiring from employers upset about an imminent tax increase.
The BoE decision comes on the heels of comments from Federal Reserve Chair Jerome Powell that indicated the central bank is in no rush to cut interest rates as the Trump administration’s trade policies may be slowing down the U.S. economy and causing temporary inflation.
Wall Street futures pointed to a lower open on Thursday. Rate-sensitive UK banks shed 1.5%, mirroring a fall in UK government bond yields. [GVD/EUR]
HSBC Holdings lost 2.1% following Bloomberg News reports that the bank is in advanced talks to sell its German fund administration business to private-equity firm BlackFin Capital Partners.
Among stocks, investment company 3i Group slipped 5.2%, landing at the bottom of the blue-chip index, after the company reported its portfolio Action’s year-to-date like-for-like sales.
Investec fell 3.8% after the wealth manager annual profit forecast disappointed investors.
(Reporting by Ragini Mathur in Bengaluru; Editing by Sonia Cheema)
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