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Sluggish UK growth puts brakes on Bank hawks

UK economic growth rises to just 0.3% in three months to June, further denting case for interest rate rise.

Sluggish UK growth puts brakes on Bank hawks

Sluggish UK economic growth of just 0.3% in the three months to the end of June has dealt another blow to hawks at the Bank of England pushing for an interest rate rise.

While growth increased from the 0.2% level seen in the first three months of the year, today's first estimate from the Office for National Statistics was below the 0.4% anticipated by the Bank.

Following last week's surprise fall in inflation, it represents another setback for the members of the monetary policy committee who have pushed for a rise.

In its June meeting, three of its eight policymakers voted for a rate rise, with the hawks' case gaining strength after Bank economist Andy Haldane, who was not among the three, last month signalled his support for a rise this year.

But since then, the doves have regained the ascendancy, with deputy governor Ben Broadbent saying earlier this month he was 'not ready' to vote for a rise.

A hike next month had already been effectively killed off by the inflation figures, with a number of commentators saying they expected the Bank to keep rates at their all-time low of 0.25% this year.

Today's economic data has done little to change that view. 'For the Bank of England outlook, what matters most is that growth in the first half of the year is markedly slower than the pace seen last year,' said James Smith, economist at ING.

'With signs of domestic inflationary pressures still limited, we think it is unlikely that the Bank will hike rates this year.'

Chris Williamson, economist at IHS Markit, said despite the modest uptick compared to the first quarter, economic growth could deteriorate over the next six months.

'We'll know more next week with the publication of purchasing managers' index data for July, but at the moment the likelihood is that the second quarter's modest growth may represent a high point in the economy's performance in 2017,' he said.

'As such, there's a not-insignificant risk that policy may even need to be loosened to help the economy if conditions deteriorate further.'

2 comments so far. Why not have your say?

Alan Tonks

Jul 26, 2017 at 17:36

Why do we keep getting these rate hike non-stories again and again, who but an idiot would believe them!!

The hawks and the so-called doves in the Bank of Carney are nothing more than cuckoos infesting the once proud Bank of England!!

Never mind the manipulators will make a killing, hurrah for Carney chief of the cuckoos!!

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Jul 27, 2017 at 09:25

Yes Alan we live in this farcical world of .25% Int Rate encouraging the greedy and brainless to overstretch themselves and ignoring the fact that savers outnumber borrowers by 7:1. Macro economic manipulation through QE is dishonest, unreal and wrong especially when it goes on for nearly 10 years. The housing market is now out of reach for our children and the private landlords cash in. What a weird world we live in. It cost me thousands but rather than living on false hope I wish they had let HBOS go bust - the financial crisis would have quickly sorted itself through the open market.

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