U.K. stocks rose on Thursday, while the local currency plunged, after the Bank of England kept interest rates on hold and signaled monetary policy will remain accommodative as long as the inflation outlook is dim.
The FTSE 100 index was up 0.31% to 6,355.72, setting in track for a seventh straight day in positive territory. The gauge opened lower, but edged higher in the run-up to the BOE decision and release of minutes.
The central bank’s Monetary Policy Committee voted 8-1 to maintain its key lending rate at record low of 0.5%, where it has settled in March 2009. Meanwhile, the MPC voted unanimously to keep its 375 billion pound ($574.54 billion) quantitative-easing program unchanged.
The committee said in the minutes that since inflation is below the target, "and the likelihood that at least some spare capacity remains in the economy, the MPC intends to set monetary policy so as to ensure that growth is sufficient to absorb any remaining underutilized resources.”
“That will support domestic cost growth and is necessary to ensure that inflation is on track to return sustainably to the 2% target rate within two years,” it said.
The pound erased today's gains
after the rate decision, to trade at 1.5283 against the dollar, down 0.23%. Sterling also slipped vs the euro with EUR/GBP last seen at 0.7363, up 0.37%.
Investors were also monitoring other central banks on Thursday.
Minutes from the European Central Bank’s Sept. 3 meeting showed that euro area's officials agreed that the “overall economic situation in the euro area had become more challenging since before the summer.”
Minutes from the Federal Reserve’s Sept. 17 meeting come out at 2 p.m. Eastern Time, after the London market closes.
