FTSE 100 nears record high as markets bet Bank of England will cut interest rates in June

Friday 22 March 2024 3:39 pm

Over the course of the week it has gained 2.7 per cent, its strongest performance all year.

The FTSE 100 is drawing nearer its record high amid a global rally fuelled by bets that central banks will start cutting interest rates in June.

The blue-chip index was trading 0.76 per cent higher on Friday afternoon at 7,940.35, just a few points off its all-time high of 8,014.31 set last February.

Over the course of the week it has gained 2.7 per cent, its strongest performance all year. Although other markets around the world also posted gains this week, the FTSE 100’s rally was especially strong.

The rally was prompted by relatively dovish signals from both the US Federal Reserve and the Bank of England.

The Fed left interest rates on hold on Wednesday, but officials continued to expect three rate cuts over the course of 2024. Although this was in line with its December expectations, the move was seen as dovish, given the Fed also expected higher inflation and stronger growth.

The Bank also left rates on hold, but hawkish dissent on the Monetary Policy Committee (MPC) dissipated. In a statement following the decision, Andrew Bailey, governor of the Bank, said “things are moving in the right direction”.

Also thrown into the mix was a rate cut from the Swiss National Bank, a move which surprised markets.

June is now looking an increasingly likely start date for the start of a global cutting cycle. According to CME’s Fedwatch tool, there is a 62 per cent chance the Fed will cut rates in June.

“This week was one for the doves, with market pricing converging to the idea that June will likely be the month that the ECB, Fed and BoE all make their first rate cut,” analysts at ING said.

“The Fed and BoE overall messages didn’t change, though offered enough dovish hints for market expectations to converge on June as the kick-off date for the easing cycles,” they continued.

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