Interest rates will be cut within weeks, experts predicted after paltry economic growth figures.
Economists believe that the Bank of England’s Monetary Policy Committee will trim rates at its meeting on Thursday February 6, after GDP grew by just 0.1 per cent in November and inflation nudged down.
“Together with December’s softer-than-expected CPI inflation print, today’s release revealed that the economy continued to have little momentum towards the end of last year, leaving us content with our view that the Bank of England will cut interest rates from 4.75% to 4.50% in February,” said Ashley Webb, UK economist at Capital Economics.
Rob Wood, chief UK economist at Pantheon Macroeconomics, added: “The MPC will now certainly cut rates in February.
“With inflation heading above 3% in April and likely to stay there for most of the rest of 2025 we think the MPC will have to give more hawkish guidance about the pace of rate cuts after February, paring back to signalling 2-3 cuts this year.”
A cut in interest rates will be welcomed by millions of homeowners as it feeds through into lower mortgages, though it could hit rates on saving accounts.
While the Government will welcome any growth, having made it its No1 priority, the latest figures were weaker than expected by the City.
The UK economy grew in November by 0.1% after falling by 0.1% in both September and October, according to the Office for National Statistics.
Most economists were expecting GDP to rebound by 0.2% in November.
The figures come after a difficult past couple of weeks for Chancellor Rachel Reeves, after government borrowing costs surged and the value of the Pound slumped amid worries over the economy and UK debt levels.
Markets calmed on Wednesday after a surprise fall in inflation, offering some welcome respite to Ms Reeves.
But the paltry growth for November means the economy would need to grow by at least 0.1% in December just to avoid contracting overall in the final quarter of the year.
Ms Reeves said: “After 14 years of economic stagnation, this Government’s number one mission is to grow our economy.
“I will fight every day to deliver that growth and put more money into working people’s pockets.”
But shadow Chancellor Mel Stride said: “Labour inherited the fastest growing economy in the G7, now we are stagnating. They are killing investment and jobs.
“The Chancellor seems content with burying her head in the sand and blaming the previous government, but this is a crisis made in Downing Street. We need an urgent change of course.”
The Bank of England as pencilled in no growth again for the fourth quarter, following zero expansion in the previous three months.
There are mounting fears the economy is heading for a period of so-called stagflation, where there is little or no economic growth combined with persistent inflation.
While figures on Wednesday showed inflation edging back to 2.5% last month from 2.6% in November, many economists believe it will rise close to 3% in the coming months.
