FTSE 100 steady near 10,440 ahead of BoE decision

The FTSE 100 traded near 10,440 on Wednesday while investors awaited the Bank of England’s interest rate decision following a slowdown in UK inflation.

The Office for National Statistics reported consumer price inflation eased to 2.8% year-on-year in May, below the 3.0% median forecast. Monthly inflation rose 0.2% versus an expected 0.4%, the second consecutive month of softer-than-expected readings.

Falling crude oil prices were cited as a factor likely to reduce inflationary pressure in coming months and move inflation closer to the BoE’s 2.0% target.

The government will publish employment figures on Thursday. Economists forecast the unemployment rate to remain at 5.0% and the claimant count increase to slow to about 25,800. Markets expect those labour-market details to influence views on future monetary policy.

Economists broadly expect the Bank Rate to be held at 3.75% at the BoE announcement. One market poll placed the probability of a hold near certainty, while a separate survey found roughly 59% of traders anticipate a rate rise later in the year if inflation stays above target.

The bond market has shown some dovish pricing. The five-year UK government bond yield fell to about 4.285%, its lowest since mid-April and below this year’s peak near 4.72%. The two-year yield retreated to roughly 4.145% from an earlier high near 4.70%. Longer-term yields weakened and sterling traded around $1.33.

The Federal Reserve left its policy rate unchanged at 3.5%–3.75% on Wednesday. Nine Fed officials indicated they would support further hikes later in the year if inflation proves persistent.

The FTSE 100 has traded in a narrow range in recent sessions, a few points above its 50-day moving average and a descending trendline that has capped rallies since February. Technical indicators include a small inverted head-and-shoulders pattern and the relative strength index rising above the neutral 50 level. The next resistance level for the index is around 10,945.

Investors will monitor the BoE decision and Thursday’s jobs data for signals on how long policy rates may remain elevated and how yields and currency moves could affect equity performance.