(Reuters) -Britain's FTSE 100 closed at an all-time high on Wednesday, lifted in part by housebuilder stocks buoyed by hopes of an interest rate cut, while Burberry's shares sank after it reported a sharp fall in quarterly sales.

The blue-chip rose 0.2% to close at 8445.80 points. The index touched an intraday record of 8474.71 points earlier before paring some gains.

Wall Street's S&P 500 touched its life high after data showed U.S. consumer prices increased less than expected in April, boosting financial market expectations for a September interest rate cut.

"Today's data definitely proves we're back into the disinflation process. (It is) a sign of relief for markets and that's why we've seen that initial risk appetite," said Daniela Hathorn, senior market analyst at Capital.com.

The bets on monetary policy easing by the Federal Reserve and other major central banks hammered U.S. and UK bond yields, with the 10-year gilt yield falling to its lowest since April 10.

Traders priced in a 56% chance of a rate cut by the Bank of England in June, from 50% before the data.

The hope of falling rates boosted rate-sensitive UK equities including housing and real estate investment trusts (REITs). The FTSE 350 index of housebuilders jumped 2.8% to a near-three month high, while REITs surged to their highest since January.

"In the short term a lot of the good news for the index is now priced in, and a lot of the much-vaunted valuation discount has been cleared through the huge gains of recent week," Chris Beauchamp, chief market analyst at online trading platform IG, said about the recent record run in the FTSE 100.

A big drag on the day was Burberry, which slid 7.3% after the luxury group's fourth-quarter like-for-like sales slumped 12% and annual profits by dropped 34% amid a wider slowdown in the sector.

Compass Group dropped 3.0% as the catering group expects volumes to moderate for the rest of the year.

Credit data firm Experian advanced 8.1% after it forecast annual organic revenue growth of between 6% and 8% for fiscal year 2025.

The FTSE 250 midcap index climbed 0.8% to its highest level in more than two years.

Royal Mail's parent company International Distributions Services surged 16.0% after it said it was set to agree a 3.5 billion pound ($4.42 billion) takeover by Daniel Kretinsky if the Czech billionaire makes a formal offer.

(Reporting by Pranav Kashyap, Purvi Agarwal and Sruthi Shankar in Bengaluru; Editing by Varun H K and Alison Williams)

By Pranav Kashyap, Purvi Agarwal and Sruthi Shankar