UK Stocks Plummet Amid Uncertainty Over Rate Cuts
The FTSE 100 declined to nearly a one-month low as traders reduced their expectations for the Bank of England to lower interest rates next year.
The main FTSE 100 index fell by 0.7%, while the midcap FTSE 250 dropped by 1%.
Ahead of Thursday’s interest rate decision by the Bank of England, data revealed that wages increased more than anticipated in the three months leading up to October. This stronger-than-expected wage growth led investors to scale back their rate cut forecasts for the coming year, resulting in higher government bond yields.
The central bank is widely expected to maintain current interest rates this week, following the Federal Reserve’s policy announcement the previous day, which is likely to include a quarter-point rate cut.
Sanjay Raja, Deutsche Bank’s chief UK economist, commented: “Wage growth looks strong – this will bolster the hawks’ case to hold the bank rate steady for longer and keep policy more restrictive. But at the same time, jobs demand is falling rapidly. Payrolls are shrinking, which will eventually impact demand and medium-term price pressures.”
