By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- The U.K.'s FTSE 100 index snapped a
five-day winning streak and the pound climbed on Wednesday after
minutes from the latest Bank of England policy-setting meeting
showed two members were in favor of hiking interest rates.
The FTSE 100 index dropped 0.4% to close at 6,755.48, after
closing at the highest level since late July on Tuesday.
Investors also reacted to the minutes from the BOE's August
meeting. Two members of the Monetary Policy Committee voted in
favor of increasing benchmark interest rates by 25 basis points, to
end a five-year period of record low interest rates of 0.5%. All
nine MPC members voted in favor of keeping the bank's
quantitative-easing program at 375 billion pounds, or $623.36
billion.
Higher interest rates would be supportive for the pound, and
sterling climbed as high as $1.6680 after the minutes were
released, pulling back to $1.6640 by the time the stock market
closed, from $1.6631 ahead of the report.
"[Now] we know that we have two hawkish members in the
committee, this has lowered the bar for an increase in the interest
rate this year," said Naeem Aslam, chief market analyst at Ava
Trade.
However, the BOE decision was made before inflation data for
July showed U.K. growth in consumer prices was weaker than
expected, which eased pressure on the central bank to immediately
tighten policy. Read: Inflation may hold back BOE rate hike,
despite vote split
Outside the main index in London, shares of Balfour Beatty PLC
tumbled 6.7% after the U.K. construction firm rejected a sweetened
merger offer from Carillion PLC . Carillion shares lost 2%. (Read
more about notable European share moves here:
http://www.marketwatch.com/story/carlsberg-slumps-in-europe-after-profit-warning-2014-08-20.)
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