FTSE keeps rising as Bank of England holds interest rate at 0.5 per cent

 
Emma Haslett
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Investors responded optimistically to the election result (Source: Getty)

The FTSE 100 was the only European market to rise today, as investors continued to show their optimism at the outcome of the election and the Bank of England's decision to hold interest rates.

By lunchtime, the FTSE was trading above 7,000 points for the second day in a row, 2.47 per cent up on Friday's closing price. The pound rose 0.76 per cent against the euro, to €1.3881, and 0.14 per cent against the dollar, to $1.5476.

Meanwhile, Germany's Dax was 0.43 per cent lower, while France's Cac was down 1.35 per cent as investors showed their nerves over Greece's ability to stump up €750m (£540m) of debt repayments to the International Monetary Fund (IMF), due this week.
The news came as the Bank of England's monetary policy committee announced - in what is now barely a market event - its decision to hold interest rates at 0.5 per cent. The Bank had delayed its announcement because of the election.

With the Conservatives now firmly in charge, economists expect austerity measures to come thick and fast - meaning rate hikes may come more slowly than previously expected.

Howard Archer, chief economist at IHS, it will be 2016 before rates rise to 1.5 per cent, hitting 2.5 per cent at the end of 2017.

"It is very possible that the Bank of England will take interest rates up even more slowly [than expected]," he said.

"Any hit to economic activity coming from increased uncertainty over a referendum on EU membership in 2017 could also cause the Bank of England to temper interest rate hikes."

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