London Stocks Lifted by BoE's Rate Steady Decision, Tate & Lyle Slips

London stocks gained on Thursday after the Bank of England maintained interest rates at 5.25%. The FTSE 100 and FTSE 250 both rose by 0.4%. Governor Andrew Bailey hinted at a potential rate cut in August if inflation remains at 2%. Tate & Lyle shares dropped after announcing the acquisition of CP Kelco.

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FTSE 100, FTSE 250 up 0.4% each *

Bank of England keeps rate steady at 5.25% *

Tate & Lyle slips after deal to buy CP Kelco for $1.8 bln (Updated at 1125 GMT)

By Pranav Kashyap June 20 (Reuters) -

London stocks edged higher on Thursday, as the Bank of England kept rates on hold as expected, while hopes increased for a rate cut in August after Governor Andrew Bailey cheered inflation's return to the 2% target. The blue-chip FTSE 100 rose slightly after the decision, gaining 0.4% to a more than a week-high and set to register a third straight day of gains.

The mid-cap FTSE 250 was up 0.4% at 20,461.46. The BoE's Monetary Policy Committee voted 7-2 to keep rates at a 16-year high of 5.25% ahead of a July 4 election.

Governor Bailey said it was "good news" that inflation is back at 2%. He added the bank "needs to be sure that inflation will stay low" before cutting rates. Markets now see a 45% chance of a rate cut in August, compared with 30% before the rate decision.

The pound slipped 0.2% against the U.S. dollar and was last at $1.2687. The UK's 5-year gilt yield fell marginally and was trading at 3.9%. "Markets are pretty muted in reaction because nothing happened today, but there is this slight guidance that a cut is to be expected later this summer," said Patrick Armstrong, chief investment officer at Plurimi Wealth.

"The current decision was 'on a knife edge' and indicates it may not take much further evidence on inflation to provoke a cut later this summer." Rate-sensitive homebuilders spiked higher, advancing 0.7%, while precious metal miners were the top gainers among FTSE 350 sectors as bullion prices climbed to a two-week high on softer U.S. economic data.

Shares of Ocado

fell 14.4% after the online supermarket's Canadian partner paused a planned opening of a Vancouver warehouse. CMC Markets soared nearly 7% after the trading platform posted a 52% jump in its annual adjusted pre-tax profit.

Tate & Lyle fell 7.5% after the London-headquartered food ingredients maker entered into an agreement to buy U.S.-based CP Kelco for $1.8 billion from J.M. Huber Corp. Its shares were also trading ex-dividend.