(Sharecast News) - London stocks were still a little weaker by midday on Thursday after the Bank of England stood pat on rates, as widely expected, although it was a close call.
The FTSE 100 was down 0.2% at 10,385.82, having breached 10,400 for the first time on Wednesday.
The Monetary Policy Committee voted 5-4 to maintain Bank Rate at 3.75%, with four members voting for a 25 basis points cut.
The Bank said: "Monetary policy is being set to ensure that CPI inflation not only reaches 2% but remains sustainably at that level in the medium term, which involves balancing the risks around achieving this. The restrictiveness of policy has fallen as Bank Rate has been reduced by 150 basis points since August 2024.
"On the basis of the current evidence, Bank Rate is likely to be reduced further. Judgements around further policy easing will become a closer call. The extent and timing of further easing in monetary policy will depend on the evolution of the outlook for inflation."
Susannah Streeter, chief investment strategist at Wealth Club, said: "The Bank of England has pushed a big red pause button on interest rate cuts as caution remains the name of the game and policymakers assess flickering growth and stubborn inflation. Although the signs are that the price spiral will be dampened down in the coming months, they've judged that it's still too early to move, especially given signs that growth in the economy is showing tentative signs of making a comeback. The latest PMI snapshot showed activity accelerating with Budget blues being cast aside.
"Plus, with headline inflation ramping up at the last count, and wage growth still uncomfortable, it's not a clement environment for interest rate cuts. Still, it was a closer call than expected, and it puts a cut in March still very much in the picture. The labour market is showing weakness, Budget changes are set to bring down energy and transport costs and a wave of cheaper Chinese goods are heading this way. So, more policymakers could well be swayed to vote for lower borrowing costs next month."
The European Central Bank is widely expected to keep rates at 2.00% when it makes its announcement at 1315 GMT.
Elsewhere, investors were mulling a survey showing that the downturn in the UK construction sector eased in January.
The S&P Global construction purchasing managers' index rose to 46.4 from December's five-and-half year low of 40.1. This was still below the 50.0 level that separates contraction from expansion but marked the highest reading since June 2025.
In equity markets, Vodafone slumped as it said it expected full-year earnings to be at the upper end of forecasts, but German growth at the telecoms operator disappointed.
Dan Coatsworth, head of markets at AJ Bell, said: "Recent news had given investors hope the problems in Vodafone's largest market - Germany - were behind it. However, its third-quarter update offered a serving of schadenfreude for its detractors as German growth slipped to a trickle.
"This overshadowed a more robust performance elsewhere and raised questions about whether the regulatory-driven issues in the German market were truly behind the company. If November's first dividend hike in seven years gave a signal that Vodafone's recovery, following years of stagnation, was finally in motion that signal feels patchier today.
"Vodafone may still be on track to deliver full-year profit and cash at the upper end of guidance, and the integration of Three UK may be progressing as planned but after an extended period of regular disappointments, shareholders can be forgiven for being cynical."
Hikma Pharmaceuticals lost ground after Brookfield confirmed after the close on Wednesday that it does not plan on making an offer for the company.
Paragon Banking was under the cosh as it traded without entitlement to the dividend.
Shell dipped as it posted a slide in quarterly earnings after lower prices and a rise in operating expenses weighed heavily. Income attributable to shareholders was $4.1bn in the final three months of 2025, a 22% drop on the third quarter.
Adjusted earnings tumbled 40% to $3.3bn. In the fourth quarter of 2024, adjusted earnings were $3.7bn. Shell blamed the decline on "unfavourable tax movements...lower marketing margins, lower realised prices and higher operating expenses".
Over the full year, income rose 11% to $17.8bn, while adjusted earnings slid 22% to $18.5bn.
Compass was well off earlier lows but still a touch lower as the catering firm backed its full-year guidance following a strong start to the year.
Defence firm Babcock nudged lower after a downgrade to 'neutral' from 'buy' at Citi.
Telecommunications giant BT reversed earlier gains to trade lower after saying it was on track to meet full-year guidance as its third-quarter results met expectations, with revenue down 4% on the year and adjusted EBITDA 1% lower.
In terms of sector, housebuilders were the biggest losers, with Persimmon, Barratt, Berkeley, Vistry, Bellway and Taylor Wimpey all down amid a slide in sterling and gilts and as a number of lenders upped rates in anticipation the BoE would stand pat.
On the upside, software stocks were the standout gainers as they recovered from the selloff of the last two sessions, with LSEG, Relx, Experian and Sage among the top performers on the FTSE 100.
Ithaca Energy shot up after a well-received full-year update, while Playtech surged as it said full-year adjusted EBITDA was set to be "significantly" above consensus expectations following a strong second half.
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