UK Interest rate held and UK economy no longer in recession

Posted on May 11, 2024 by admin in News

Home» News » UK Interest rate held and UK economy no longer in recession

The Bank of England has edged closer to a cut in interest rates, with another member of its nine-person Monetary Policy Committee (MPC) voting for lower borrowing costs this month.

A view of the Bank of England. Pic: iStock While the MPC voted 7-2 to leave UK interest rates on hold at 5.25%, the change in the vote will be seen as a further sign that they could be coming down soon – perhaps as soon as next month.

Alongside its rate decision, the Bank published new forecasts for the UK economy, which show that gross domestic product (GDP) is projected to be stronger this year and unemployment and inflation rates lower than previously expected.

It said that the CPI rate of inflation was likely to drop to its 2% target imminently – though it would bounce a little higher afterwards.

Governor Andrew Bailey said: “We’ve had encouraging news on inflation and we think it will fall close to our 2% target in the next couple of months. We need to see more evidence that inflation will stay low before we can cut interest rates.

“I’m optimistic that things are moving in the right direction.”

The critical line from the minutes of today’s decision reads that the MPC “would consider forthcoming data releases and how these informed the assessment that the risks from inflation persistence were receding.”

The UK economy is no longer in recession, according to official figures.

Gross domestic product (GDP) grew by a better-than-expected 0.6% between January and March, the Office for National Statistics (ONS) said.

Economists had predicted the figure would be 0.4%.

A recession, which is defined as two consecutive three-month periods where the economy contracts, was declared in February.

It came after the ONS said GDP, a major measure of economic growth, shrank 0.3% between October and December. It followed a contraction of 0.1% in the three months from July to September.

The slump was blamed on reduced consumer spending power amid high inflation and energy bills. Months of wet weather also contributed to keeping shoppers at home, commentators said.

The latest figures also revealed better-than-expected growth for March. GDP was up 0.4% during the month, which was higher than the 0.1% forecast by economists.

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