London stocks extended gains on Thursday, as investors anticipated a Bank of England interest rate cut later in the day amid a sharp slowdown in inflation and signs of weakening economic growth.

The UK's blue-chip FTSE 100 .FTSE was up 0.3% at 1013 GMT, after ending higher in the previous session. The domestically-focussed midcap FTSE 250 .FTMC index added 0.36%.

Meanwhile, the pan-European benchmark index .STOXX was largely unchanged ahead of the European Central Bank's policy announcement on Thursday, which is widely expected to result in a decision to hold rates.

The Bank of England is expected to cut rates by 25 basis points to 3.75%, marking its fourth reduction in 2025 and the lowest level in nearly three years, though still almost double the ECB's rate.

Inflation, which fell to 3.2% in November, remains the highest among G7 economies partly due to last year's tax hikes, limiting the scope for aggressive easing. Investors are pricing in only one more cut in 2026, likely by April, despite a slight uptick in bets after the recent inflation drop.

The FTSE 350 index of retailers .FTNMX404010 led gains, up 0.9%. Currys jumped 10.3% after the electrical retailer reported a more than doubling in first-half profit. Frasers Group FRAS.L and Moonpig Group MOONM.L were up 2.2% and 1%, respectively.

Aerospace and defence stocks .FTNMX502010 were also among the top gainers, up 0.8%.

Limiting overall gains, precious metal and mining stocks .FTNMX551030 lost 0.4%, dragged by lower gold prices. Healthcare stocks .FTNMX201030 also fell 0.4%.

The overall moves kept the FTSE 100 on track for its best year since 2009, climbing about 20% year-to-date and outpacing Wall Street's benchmark S&P 500 index .SPX, which has risen 14.3% this year.

Among individual stocks, Premier Inn owner WhitbreadWTB.L climbed 6% after Corvex disclosed a stake and urged a strategic review, placing it at the top of the benchmark index.