London stocks close higher ahead of Fed's interest rate decision

By Sanchayaita Roy

(Reuters) - British stocks rose on Wednesday, recovering from the previous session's losses, as investors waited for the U.S. Federal Reserve's policy decision later in the day.

The benchmark FTSE 100 gained 0.14%, while the domestically focused FTSE 250 advanced 0.6%.

The U.S. central bank is expected to reduce borrowing costs by at least 25 basis points at 2 p.m. ET, after a series of economic indicators pointed to a weakening jobs market. [.N]

Investors will also focus on Chair Jerome Powell's comments for clues on the Fed's rate trajectory.

Data released on Wednesday showed that British inflation held steady at 3.8% in August, the highest among major advanced economies, reinforcing expectations that the Bank of England will delay cutting interest rates until next year.

The rise in food prices, seen by BoE as key for shaping public inflation expectations, was the sharpest since January last year.

"This morning's UK inflation data supports our view that the BoE will refrain from lowering rates again through the remainder of 2025," said Matthew Ryan, head of market strategy at global financial services firm Ebury.

"With swap markets assigning no chance of any change in rates from the MPC on Thursday, the focus for investors will be on the bank's rate guidance."

The personal goods sector was the biggest gainer on Wednesday, up 3.9%, with Burberry climbing 4.2%.

Automobiles and parts stocks rose 2.7%, with luxury carmaker Aston Martin advancing the most out of the FTSE 250 stocks, with a 7.8% gain.

Centrica was among the top gainers on the FTSE 100, up 3.6%, after Morgan Stanley called the energy firm a top pick.

Ice cream unit Ben & Jerry's co-founder Jerry Greenfield quit the company after a rift with parent Unilever. Its shares ended nearly flat.

PRS REIT rose about 6% after announcing plans to sell its operating unit to Waypoint Asset Management for 646.2 million pounds ($881 million).

(Reporting by Sanchayaita Roy in Bengaluru, additional reporting by Joel Jose; Editing by Vijay Kishore, Kirsten Donovan)

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