UK's FTSE 100 snaps four-week losing streak as rate hike fears ease

* FTSE 100 up 0.22%, FTSE 250 rises 0.96%

* Data prompts traders to reassess rate hike bets

* Political uncertainty remains in focus (Updates after market close)

May 22 (Reuters) - UK's blue-chip FTSE 100 index ended a four-week losing streak after data released this week weakened expectations of a Bank of England rate hike, giving relief to investors unsettled by political uncertainty.

The blue-chip FTSE 100 index ended 0.22% higher on Friday, notching a 2.66% gain for the week. The midcap FTSE 250 closed up 0.96% for the day.

* British retail sales fell by the most in nearly a year in April, according to official figures published on Friday, adding to signs of waning consumer spending against the backdrop of the war in the Middle East and rising energy costs.

* Earlier this week, separate data also showed that inflation in April was softer than expected, while the unemployment rate ticked up.

* "The current economic backdrop is much less conducive to a long-lasting bout of inflation than it was in 2022," said Ruth Gregory, deputy chief UK economist at Capital Economics.

* On Thursday, BoE policymaker Alan Taylor also said he saw less risk of second-round inflation effects ?from rising energy prices, than in 2022 when Russia invaded Ukraine.

* "Dovish data should reduce the urgency for the BoE to act. So far the MPC (Monetary Policy Committee) is taking comfort from tightening in financial conditions which they say can give them time to assess whether to hike or not," BofA Securities analysts said.

* The brokerage now expects the central bank to raise borrowing costs in July, later than its previous estimate of a June hike.

* "Political uncertainty is likely to increase near-term policy uncertainty and lead to tighter financial conditions, which could weigh on growth," the brokerage added.

* Prime Minister Keir Starmer has defied calls from his party's lawmakers to quit, but his failure to alleviate concerns about the cost of living has disappointed voters.

* Chemical shares rose 3.45% on Friday, while aerospace and defence stocks gained 2.76%. (Reporting by Niket Nishant in Bengaluru; Editing by Sahal Muhammed and Shailesh Kuber)