Westminster Bridge at sunset, London, UK

UK’s FTSE 100 index edged slightly higher on Friday after the BoE’s interest decision on Thursday. Germany’s DAX index was almost flat after the release of strong GfK German Consumer Climate for July. French CAC 40 index as well as Euro STOXX 50 inched higher.

UK’s Economic Outlook

UK’s FTSE 100 index closed in slightly higher on Thursday after the Bank of England (BoE) announced its interest rate decision. The BoE kept its monetary policy unchanged and reiterated that the inflation could be transient.

The Central Bank’s Monetary Policy Committee voted to maintain its main lending rate at 0.1%. A majority voted to keep the asset purchases at its current level of £895 billion. Its monetary policy has been on a standstill since November 2020 while its bank rate has remained unchanged since March 2020.

According to May’s economic sentiment, the central bank stated that the country’s GDP was stronger than anticipated. UK Consumer Price Inflation came in at 2.1% in May surpassing estimates of 2%. Core inflation excluding energy prices and volatile food jumped from 1.3% in April to 2% in May.

The BoE expects inflation to jump 2.5% by the end of the year. However, the committee expects the economy to experience a transitory period of strong GDP and a surge in inflation. The MPC vowed to keep an eye on the rising inflation as the economy recovered from the pandemic.

The pound declined by more than 0.5% against the US dollar. However, it recovered some of its losses after the BoE decision to trade at $1.3920. The FTSE 100 index slightly increased on Thursday after the bank’s announcement.

The bank announced that it would discuss tapering of its monetary policy after the economy came to balance. During an interview with CNBC, BoE governor Bailey said that UK’s economy will “bounce back” before returning to balance.

FTSE 100 Performers

JD Sports Fashion plc recorded the most gains in the FTSE 100 index. The retail company gained more than 4.05% in its stock earnings. CRH plc as well as WPP plc were also among the top performers in the index. Each gained 3% and 1.84% respectively.

Among the laggards in the index include Halma plc, M&G plc, and Persimmon plc. Each declined lost more than 1% in its stock prices.

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