Yahoo Finance LIVE: FTSE ends lower as Bank of England hikes interest rates to 15-year high
A look at how the major markets are performing on Thursday
The FTSE 100 (^FTSE) was in the red on Thursday, with the pound (GBPUSD=X) also trading lower, as traders digested news that the Bank of England had increased interest rates from 5% to 5.25%.
London's benchmark index fell 0.6% on the day, while the CAC (^FCHI) tumbled 1% in Paris, and the Frankfurt DAX (^GDAXI) was 0.9% lower.
The move, which was widely expected by economists, means UK interest rates are now at a fresh 15-year high. It was the 14th consecutive increase, as the Bank battles runaway inflation.
The Bank also warned on Thursday that interest rates will remain high for at least two years while forecasting that inflation will hit its 2% target in the second quarter of 2025.
The pound which was already trading lower during the day, weakened further after the announcement, down 0.5% at $1.26 and 0.4% lower at €1.16. Sterling managed to recover by the time of the European stock market close.
"With stubbornly high services inflation and a remarkably resilient jobs market, the Bank of England had no choice but to hike again today," James de Bunsen, portfolio manager at Janus Henderson, said.
"Real signs of pain in the housing market earlier this week all but ruled out another 50bps rise. However, the MPC will keep administering its bitter medicine to the economy until it cures those price pressures. And, like a toxic course of chemo, this patient is going to feel a whole lot worse before it starts to get better."
Read more: Bank of England raises UK interest rates to new 15-year high
The hike will mean further pain for mortgage rates. Higher mortgage rates are ready starting to weigh on the UK property sector, where prices are falling by the most since 2009.
For the roughly 150,000 borrowers on tracker or variable rate mortgages in London, today's hike means an instant hike in mortgage payments.
However, for the majority of homeowners who are on fixed-rate deals, the effect will not be felt until their fixes expire.
Across the pond, the S&P 500 (^GSPC) lost 0.2% and the tech-heavy Nasdaq (^IXIC) was flat at the time of the European close. The Dow Jones (^DJI) edged 0.1% lower.
Watch: How does inflation affect interest rates?
Download the Yahoo Finance app, available for Apple and Android.
