UK shares dip as rate hike jitters overshadow cheer over fall in inflation

UK shares fell on Wednesday, after data showing a surprise fall in British consumer prices in August did little to ease bets of the Bank of England hiking interest rates by 75 basis points at its meeting next week.

A selloff in Wall Street overnight after a rise in U.S. inflation figures prompted bets for aggressive policy tightening in the world’s largest economy also weighed on the London market.

The commodity-heavy FTSE 100 slid 0.7%, while the domestically focussed mid-cap index declined 0.3% at 07:13 GMT.

Oil and mining stocks shed 1.7% and 1.0%, respectively, on fears of aggressive hikes by the Federal Reserve that could slow down the global economy and dampen commodity demand. [O/R] [MET/L]

Lower fuel prices caused an unexpected fall in British consumer price inflation last month, official figures showed, offering some relief to households after the CPI rate hit a 40-year high.

However, traders continued to see an 84% chance of a 75 basis point hike in interest rate to 2.5% by the Bank of England on Sept. 22, which would be its biggest rate rise since 1989, excluding a brief attempt to bolster sterling during a 1992 exchange rate crisis.

Redrow (LON:RDW) Plc gained 0.8% as the housebuilder reported a 31% rise in annual profit.

Croda International rose 2.1% on a ratings upgrade from Jefferies.