FTSE 100 down 1.0, FTSE 250 off 0.6

June 22 Reuters UK39;s main stock indexes dropped on Thursday as investors mulled the prospect of a higherthanexpected interest rate hike by the Bank of England, following stillhigh inflation data.

The benchmark FTSE 100 was down 1 at 0813 GMT, touching a threeweek low, while the FTSE 250 midcap index lost 0.6.

The healthcare and bank indexes were both down over 1 each, leading broadbased declines across sectors.

Traders39; bets were almost evenly split between a 25basis point bps and 50bps hike by the BoE later in the day, after data on Wednesday showed inflation defied predictions of slowing down and held steady at 8.7 in May.

With bets on further rate hikes also in the picture, investors fretted about the BoE39;s ability to curtail inflation without sparking a recession. The BoE has already raised rates by 440 bps since December 2021.

This idea of higher rates for longer is probably the issue, with UK39;s history of high inflation, said Jamie Dutta, market analyst at Vantage Markets.

Rates are already in a quite restrictive territory and then if they go above 5 that is even more restrictive we39;ll be crimping economic activity.

Not only the BoE, but the hot inflation data also flashed a warning sign for Prime Minister Rishi Sunak who pledge to halve inflation and grow the economy by the year end ahead of a national election expected in 2024.

The FTSE 100 has been muted this year, lagging a 6.5 and 14 gain in peers euro…