Another drop in interest rates, and the surprise here has been a greater consideration has been given to half a percentage of a drop in rates today, because the economic stagnation of the United Kingdom should Extend the first part of this year.
If everything was equal, the hypothesis would be that the low economy would now lead to new gradual decreases this year, lowering interest rates to 4% or less by the end of the year.
But the stagnant economy is now accompanied by net inflationist risks in the increase in energy prices.
Inflation should “increase very strongly” in the fall, approaching 4%, driven by the prices of gas prices resulting from the need to fill the storage facilities drained after a cold winter. While a recession should be closely avoided, zero growth and high inflation and an increase are “stagflation” textbooks.
In addition to everything, the bank stresses that it will be “prudent” with cuts in the context of enormous uncertainty about the trade policy of President Trump. Uncertainty does not only concern what it does, but the reaction of the market and the response of other countries, including the United Kingdom. Today’s lower forecasts have not taken into account American pricing policies.
It is a set of figures far from being happy for the Chancellor. The economy has been stable since March. A technical recession is narrowly avoided, but there is a risk of growth little or not well this year.
During this year, the economy should increase by 0.75%, half of the rate forecasts in November. Unemployment is expected to increase over the next two years to just under 5%.
Bank contacts with the company indicate that more companies have mentioned the budget as a means of deterrent in investment “referring to the relief of commercial assets, inheritance tax and National insurance.
The bank also made its long -term health of the economy, concluding that the disease, pandemic and Brexit have all reached the productivity of the economy.
Overall, a difficult national vista, with global uncertainties increasing.
