London stocks fall as BoE delivers bigger-than-expected rate hike

British equities slipped in broad-based declines on Thursday after the Bank of England delivered a bigger-than-expected half a percentage point rate hike, while Ocado shares jumped after a report on speculation about bid interest in the online grocer.

The internationally-focused FTSE 100 dropped 0.8%, touching a three week low intraday, while the domestically-focused FTSE 250 mid-cap index lost 1.3%, hitting its lowest closing level since May.

The Bank of England (BoE) raised interest rates by 50 basis points (bps) to 5%, the highest since 2008, and its largest increase since February.

“A majority of the Monetary Policy Committee doesn’t dare to rely on models or forward looking indicators too much anymore, and thinks it safer to set policy based on what they are actually seeing in the rear view mirror,” Rabobank’s Senior Macro Strategist Stefan Koopman wrote in a note.

Rate-sensitive housing-related stocks were amongst the worst hit, with homebuilders, real estate and real estate investment trusts down between 1.6% and 2%.

British banks lost 2.1%.

Several brokerages raised their peak rate forecasts for the BoE following Thursday’s hike. Traders now see the Bank Rate topping out at 6.05% in February.

Dean Turner, chief euro zone and UK economist at UBS Global Wealth Management, noted that a combination of Wednesday’s hot UK inflation data and last week’s jump in wages led to the BoE’s larger-than-expected hike.

Ocado jumped 32% to top the FTSE 100 after The Times newspaper reported speculation of possible bid interest in the online supermarket and technology group, including from tech heavyweight Amazon.

Heavyweight energy stocks also lost 1.2% amid broader market weakness and slipping oil prices.

The FTSE 100 has been muted this year, lagging 7% and 13.9% gains in Europe’s STOXX 600 index and Wall Street’s S&P 500 respectively, on volatile commodity prices and a hawkish BoE.

The BoE’s decision arrives on a day when other major central banks, including those in Norway and Switzerland, also raised rates.