London Stocks Rise as Fed Warns Inflation Not Slowing Down

Stock prices in London closed higher on Friday, joining a broader rally across European and US equities. The FTSE 100 index rose by 31.72 points, or 0.3%, to 10,824.26.

Federal Reserve chairman Kevin Warsh's speech at Jackson Hole fueled expectations for higher US interest rates. He warned that inflation is not slowing down meaningfully and policymakers must be confident that it is easing before considering rate cuts.

The Fed's target of 2% inflation remains a firm goal, according to Warsh, but he noted that the economy has strengthened and labour markets are consistent with full employment.

Samuel Tombs, chief US economist at Pantheon Macroeconomics, said investors have priced in an additional 8 basis points of policy tightening over the next 12 months following Warsh's speech. He added that a single 25bp hike in the funds rate by December is now more likely.