The FTSE 100 closed down 0.6% and the FTSE 250 was down 1.4% after traders around the world were hit by fears over interest rate rises, with central banks both in the UK and across the pond set to make decisions on policy in the face of burgeoning inflation.
Sentiment in the U.S. and UK was further chilled by a prediction of a ‘long, ugly’ recession from economist Nouriel Roubini, who gained the nickname ‘Dr Doom’ when he predicted the 2008 financial crisis.
America’s Federal Open Market Committee is set to make its decision on interest rates on Wednesday while on Thursday the Bank of England’s Monetary Policy Committee is set to make its move.
In the UK, some investors are expecting a 75-point hike in interest rates, thanks in part to the weak pound, which has hit lows not seen since 1985 in recent days.
Katharine Neiss, chief European economist at PGIM Fixed Income, says, “With the UK economy weakening, there is a case to be made for the Bank of England (BoE) to stay focussed on the medium-term outlook for inflation and on replenishing its toolkit. This would speak to continuing with its measured pace of tightening, alongside a well-telegraphed active run-off of its balance sheet.
“But with inflation continuing to rise and the prospect of a sizable fiscal expansion on the horizon, there are many that would argue for a more aggressive rate rise at the BoE’s next policy meeting.”
Among the day’s biggest fallers was Ocado Group (GB:OCDO) which dropped 9.12% after analysts at HSBC moved their recommendation from Hold to Sell, and Frasers Group (GB:FRAS) fell 1.84% as founder Mike Ashley announced he was to step down from the company’s board.
British business news today
Truss plans radical shift in economic policy (FT)
Financial watchdog finds teeth (Times)
Taxpayer to cover half of business’s electricity bills (Times)