London, Frankfurt bourses hit record peaks on rate cut hopes

by Jonathan Adams
FTSE 100

The FTSE 100 index, which has been breaking records repeatedly in recent days, extended the rally, gaining 0.3%, and the DAX in Frankfurt came just short of 18,700 points

The London and Frankfurt stock exchanges hit record highs Thursday as the Bank of England kept its interest rate at a 16-year high but raised hopes of a cut in the coming months.

Britain’s benchmark FTSE 100 index, which has been breaking records repeatedly in recent days, extended the rally, advancing 0.3%.

The DAX in Frankfurt came just short of reaching 18,700 points. The Paris CAC 40 also gained after dropping earlier in the day.

The BoE kept its key rate at 5.25% for a sixth consecutive meeting in efforts to tame inflation, mirroring a wait-and-see approach by the US Fed and ECB.

UK annual inflation dropped less than expected in March to 3.2% but Bank of England Governor Andrew Bailey voiced optimism that it would soon return to the central bank’s 2% target.

I am optimistic that things are moving in the right direction, he said.

His comments raised hopes that the Bank of England could soon cut rates. Its next meeting is in June.

There is a cautious sense of optimism with analysts forecasting we are edging closer to the first cut in interest rates since the pandemic, with the first cut potentially this summer, according to Richard Flax, CIO at Moneyfarm.

The BoE also released its latest quarterly Monetary Policy Report, with forecasts for growth revised higher and the inflation outlook declining below 3%, noted XTB research director Kathleen Brooks.

The economic backdrop has been given a good boost from this Monetary Policy Report, and that is reflected in the FTSE 100, which hit a new intra-day record high, she told AFP.

The ECB is expected to cut its rates in June.

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