UK Economic Decline in April Fuels Possible Rate Cuts
(MENAFN) The British economy shrank by 0.3 percent in April, leading analysts to adjust their predictions regarding potential interest rate reductions, now forecasting them for August or November rather than during the Bank of England’s (BoE) upcoming session.
Data from the Office for National Statistics highlights a significant contributor to this downturn: an unprecedented drop in exports to the United States.
While it is broadly anticipated that the BoE will maintain its current interest rate policy in the upcoming meeting, the likelihood of a rate decrease later in the summer has grown.
According to Raj Badiani, Director of Economics at S&P Global Market Intelligence, the BoE is projecting sluggish expansion for the second quarter.
As such, the central bank is expected to hold its policy rate steady at 2.45 percent next week, before trimming it down to 3.75 percent in stages over August and November.
Paul Dales, the lead UK economist at Capital Economics, remarked that the recent economic growth trend in the UK appears unsustainable.
Although it may not lead to immediate action by the BoE, it adds weight to the expectation of a further cut in August, stating that it is “one more piece of news pointing to another cut in August.”
In a similar vein, Sanjay Raja, chief UK economist at Deutsche Bank, wrote that the nation’s GDP was “always on a collision course for a course direction after a super strong start to the year,” suggesting that this reversal was inevitable following a powerful beginning to 2025.
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