London markets jump ahead of expected big US Federal Reserve rate rise

London markets shrugged off bets on the US Federal Reserve hiking rate steeply later today to jump during opening exchanges.

The capital’s premier FTSE 100 index added 0.43 per cent to reach 7,337.93 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, increased 0.07 per cent to 19,581.91 points.

Traders are bracing for Fed chair Jerome Powell and the rest of the federal open market committee to announce their latest decision on American borrowing costs later today.

Analysts think the world’s most influential central bank will lift rates 75 basis points again in a bid to tame the worst inflation surge stateside since the 1980s.

There is an outside chance the Fed will raise rates a full percentage point.

Global stock markets have been extremely volatile since the start of the year, driven by traders repositioning their portfolios in response to central banks reining in monetary policy and scorching inflation.

Traders are also worried higher rates will add to the list of problems, such as cooling consumer spending, that may tip some of the world’s biggest economies into recession.

But, second quarter earnings season has revealed consumers are more resilient than feared.

FTSE 100-listed and Britain’s largest mortgage lender Lloyds surged 3.91 per cent after it raised financial forecasts this morning. However, it did set aside nearly £400m to deal with an expected jump in loan defaults due to the rising cost of living.

Higher rates have also boosted sentiment to the lender. Banks can charge borrowers more in an elevated interest environment.

Barclays, NatWest and Standard Chartered all report this week and are also expected to have received a boost in the second quarter from the Bank of England raising rates five times in a row.

The pound gained ground on the greenback, strengthening 0.12 per cent to buy $1.2039.