May 30, 2024

Delays in cutting interest rates ‘will keep UK economy subdued’

The British economy will remain subdued this year thanks to the Bank of England delaying cuts to interest rates amid stubborn inflation, but growth is expected to improve markedly in 2025, new forecasts show.

Gross domestic product is projected by the EY Item Club to jump by 0.7 per cent this year, a downgrade from the 0.9 per cent expansion forecast by the consultancy in the winter.

Economic activity is likely to remain constrained by interest rates staying tight for longer than thought. Financial markets now expect the Bank to lower rates by a quarter point only once or twice this year, starting at the September or November monetary policy committee meetings. Six quarter-point rate cuts were priced in at the start of the year.

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