FTSE 100 climbs toward 10,000 as rate-cut bets intensify after cooling inflation
Bank of England rate-cut expectations lift stocks while gilt yields fall; investors weigh path of policy next year
The FTSE 100 climbed toward 10,000 on Wednesday as investors increased bets on faster rate cuts after fresh inflation data showed November consumer prices cooled. The Bank of England is expected to reduce the base rate from 4.00% to 3.75% at Thursday's meeting, after November CPI slipped to 3.2% from 3.6%, sparking hopes for more easing next year. By midafternoon, the blue-chip index was up about 1.6% at 9,835.3, still short of its intraday high of 9,930.09 set on 12 November, but signaling renewed confidence following a rough start to the week.
Financials led the gains, with Phoenix and HSBC rising 3.9% and 4.4%, respectively, as lower borrowing costs support banks’ profit margins and balance sheets. Sentiment also benefited from a more constructive stance among homebuilders, with Barratt Developments, Redrow and Persimmon up roughly 2.5% as expectations for a warmer housing market lingered in the backdrop of cheaper financing. The index’s gains were reinforced by stronger energy and materials names after the United States blocked sanctioned tankers from moving in and out of Venezuela, a move that helped lift oil and precious metals prices. In the session, Metlen Energy & Metals, Endeavour Mining and Anglo American each added more than 3%, underscoring uplift in commodity-linked equities.
The rally came as gilt yields fell across maturities, a sign that investors are pricing in lower expected borrowing costs ahead. Sterling buckled under the prospect of a more accommodative Bank of England, which in turn supported the upside for domestically focused equities even as overall sentiment remained nuanced around the global growth outlook. Market pricing pointed to two additional BoE rate cuts next year, potentially bringing the policy rate down to about 3.25% by the summer.
Emma Wall, chief investment strategist at Hargreaves Lansdown, said lower interest rates could be advantageous for highly leveraged corporate entities and domestic consumption, which could in turn bolster corporate revenues. Still, some analysts urged caution. David Morrison, senior market analyst at Trade Nation, warned that inflation remains well above the BoE’s 2% target and that the trajectory of price pressures over the coming months is far from assured. He noted that no one should assume the recent trend will automatically continue, given the uncertainties that remain in the inflation path and the global economy.
The broader market context underscored the divergence between equities and fixed income while investors evaluated the policy path ahead. The FTSE 100 has risen roughly 19% so far this year, supported in part by rate-cut expectations and relative resilience in the energy and materials sectors. Meanwhile, the FTSE 250 managed to post smaller gains of around 0.8%, reflecting a mixed appetite for risk and ongoing concerns about investment cycles and fiscal policy.
The latest price action comes as traders continue to monitor data and central-bank commentary for signs of how quickly inflation will decelerate and how aggressively policymakers will respond. While the near-term trajectory appears to favor lower rates, the path ahead remains uncertain, with several data releases and geopolitical developments likely to shape the pace and magnitude of any further easing. Investors will be listening closely as Thursday’s BoE decision and accompanying projections frame expectations for the remainder of the year and into 2026.