Banks support FTSE 100 as UK inflation hits double digits

(Reuters) - UK's FTSE 100 edged higher on Wednesday with banking stocks in the lead after inflation hit double digits for the first time in four decades, spurring bets of aggressive moves by the Bank of England to tame surging prices.

The blue-chip added 0.1% by 0707 GMT, while the FTSE 250 midcap index climbed 0.2%.

Sterling firmed slightly after official figures showed consumer price inflation jumped to a higher-than-expected 10.1% in July, its highest since February 1982, up from an annual rate of 9.4% in June, intensifying the squeeze on households.

Traders now see an over 85% chance of a half percentage point rate hike in September by the central bank.

UK's banking index rose 0.5%, with Barclays up 1.4%.

Carnival Plc rose 5.3% after Carnival Cruise Line said booking activity nearly doubled pre-pandemic levels after it announced an ease in COVID-19 testing requirements for passengers.

Among small cap stocks, Cineworld dropped 39.1% after the world's second largest cinema chain warned that admission levels at its theatres are likely to stay lower than expected until November due to limited film releases.

(Reporting by Sruthi Shankar and Johann M Cherian in Bengaluru; Editing by Sriraj Kalluvila)