FTSE 100 is lower than Bank of England interest rate decision

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FTSE100: Bank of England set to increase borrowing costs in an effort to combat inflation Photo: Getty

The FTSE 100 opened in red and European stocks also opened in red. Investors remain cautious ahead key decisions from the UK and European Central Bank.

The FTSE 100 (^FTSE) lost 0.53% to 7,457 at the open, while the CAC (^FCHI) in Paris slipped 0.75% to 6,668 points. Germany’s DAX (^GDAXI) retreated 0.26% to 14,460.

The Bank of England UK interest rates are expected to rise to 3.5% in the future, the highest level since October 2008. This is up from 3% currently.

Victoria Scholar, head of investment at Interactive Investor, said: “The Bank of England is expected to vote in favour of a more moderate 0.5 percentage point interest rate increase to 3.5% at its meeting today.

Continue reading: Bank of England widely expected to raise interest rates to 3.5%

“This will immediately impact those on variable rate mortgages while those with fixed rate mortgages set to expire soon will have to refinance at higher rates.When the Monetary Policy Committee last met in early November, it carried out the biggest hike in over 30 years, raising rates by 0.75 percentage points to 3% in attempt to tame the UK’s sky-high inflation and price instability.

“At today’s meeting, there are likely to be a range of opinions on policy from members of the MPC. Some members could vote to increase inflation expectations and drive inflation higher by voting for a 75 basis point increase. Others could vote for no change, afraid of the negative effects of tightening too fast at a time in which the UK is on the verge of a recession.

Michael Hewson of CMC Markets said the Monetary Policy Committee could be split today too: “The weak economic outlook will play a part in today’s decision with the real possibility of a three-way split on policy, which will make the prospect of a clear message much more difficult.

“We could see policymakers argue against a 50bps move and some for a 25bps rise. Some could also push for 75bps to frontload the hiking process.”

Soon after the Bank of England has announced its decision, the European Central Bank will also make its call. It is expected that they will increase rates by 0.5%.

Brent crude oil (meanwhile)BZ=F) is up to around $81/barrel as the OPEC and the International Energy Agency (IEA) forecast a rebound in demand over the course of next year.

S&P 500 futures (ES=F), Dow futures (YM=F) and Nasdaq futures (NQ=FAs Europe’s first trade opened, all of the above were in the red.

In Asia, Tokyo’s Nikkei 225 (^N225) fell 0.37% to finish at 28,051 while the Hang Seng (^HSI) in Hong Kong plunged 1.62% to 19,355. The Shanghai Composite (000001.SS) lost 0.25% to 3,168 points.

Wall Street markets ended lower after investors were subject to a 50-basis points interest rate increase by the US Federal Reserve.

Continue reading: UK economy returned to growth in October with 0.5% rise in GDP

The Dow Jones (^DJI) slipped 0.42% to 33,966. The S&P 500 (^GSPC) lost 0.61% to finish at 3,995 points and the tech-heavy Nasdaq (^IXIC) slipped 0.76% to 11,170.

The Fed slowed its rate rises last night, but indicated that US interest rates will go higher than expected. This is fueling fears of a recession.

Jim Reid at Deutsche Bank said: “If you wanted to briefly sum up the FOMC meeting last night you would probably say that the Fed were hawkish but that the market doesn’t believe they will be.”

Watch: Economy is ‘being stubborn’ amid Fed rate hike decisions, inflation: Strategist

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