The Bank of England has warned that the economy of the United Kingdom is highly likely to continue to show zero growth until 2025 against the background of high-interest rates or even a continued increase in this indicator.
This statement was made after the aforementioned financial regulator left interest rates unchanged at 5.25% for the second time in a row. This indicator is the highest in the last 15 years.
British Prime Minister Rishi Sunak has promised to achieve the growth of the British economy by the end of this year. However, the forecasts of some experts assess the relevant prospect as unlikely.
The head of the Bank of England, Andrew Bailey, said that in the current economic and financial realities, it is too early to discuss the issue of lowering interest rates. At the same time, the financial regulator expects that a sharp decline in the inflation rate will be recorded in the coming months. This means that there is a chance of fulfilling Rishi Sunak’s promise to reduce the growth in the cost of goods and services by half, to about 5%, by the end of 2023, and is not something impossible.
Until September of this year, the Bank of England consistently raised interest rates. The relevant decisions were made by the financial regulator 14 times in a row. These actions of the Bank of England were aimed at curbing the process of inflation, which demonstrated steady growth and was a factor of negative impact on the material well-being of households, devouring their budgets.
The inflationary trend in the UK has caused an increase in mortgage payments. This circ*mstance has become a factor of pressure on borrowers. Also, the inflationary process has increased the level of savings.
Andrew Bailey stated that the Bank of England intends to adhere to a policy of high-interest rates until there is final certainty that inflation will return to the target of 2%.
The latest indicator of price growth for goods and services in the United Kingdom was recorded at 6.7% in the year to September.
The Bank of England foresses that the inflation figure will continue to show the dynamic of decline. The financial regulator expects that the weakening of the growth of energy and food prices will contribute to the implementation of this scenario. The Bank of England also predicts that inflation will remain at around 3% over the next year.
During a conversation with media representatives, Andrew Bailey said that if the conflict between Israel and Hamas spreads to the entire Middle East, it will become a factor of negative impact on the cost of energy. According to him, the threat to oil and gas prices in the event of a scaling up of hostilities is obvious. He also said that the Bank of England is closely monitoring developments in the Middle East. At the same time, Andrew Bailey stated that so far this conflict has not caused a significant change in the cost of energy.
The Bank of England does not forecast a recession. But at the same time, the financial regulator expects zero growth of the British economy until 2025. Andrew Bailey described the prospects for the recovery of positive economic dynamic as restrained, noting that the current situation is not unusual. According to him, in many other countries, there is a similar state of affairs.
British Chancellor Jeremy Hunt has promised that measures will be taken to resume the growth of the country’s economy. In November, he will unveil the government’s plans to stimulate the economic system. Also, according to him, as part of a preliminary study of possible efforts to achieve this goal, such options as raising private investment, returning more Britons to work, and creating a more productive state are being considered.
Labor, assessing the current situation, said that 13 years of economic collapse have worsened the situation of working people. The Liberal Democrats stated that the Bank of England’s decision on interest rates is little consolation for working families.
Modupe Adegbembo, G7 economist at Axa Investment Managers, says that it is impossible to exclude the possibility that inflation will be more stable than expected, and the corresponding trend will be observed for a long period, which will provoke the Bank of England’s actions corresponding to such a scenario in the form of holding high rates. At the same time, the expert notes that the financial regulator may reduce the mentioned indicator earlier and faster if the prospects of economic growth deteriorate rapidly.
As we have reported earlier, Bank of England Postpones Implementation of New Banking Reforms for Summer 2025.
FAQs
The Bank of England will cut the base rate to around 3 per cent by in 2025, according to the latest forecasts from Capital Economics. Wider market expectations continue to also all point towards the Bank of England cutting the base rate later in 2024, albeit they have been revised up since the start of the year.
What will the UK economy growth in 2025? ›
The UK economy staged an early recovery from a technical recession in the second half of 2023, with real GDP growth expected to be 0.3% in 2024, and to accelerate to 0.9% in 2025. We expect improving incomes to bolster consumer spending, while investment should also benefit from easing credit conditions.
Is the UK economy in trouble? ›
UK slipped into recession at the end of 2023. The UK economy met the definition of a technical recession (two successive quarters of falling output) by contracting by 0.3% in the fourth quarter of 2023 and recording a 0.1% decline in the third quarter.
Is the UK in recession 2024? ›
UK Economic Outlook
The UK economy is expected to grow every year until the end of 2026 but will continue to lack momentum. While 2023 ended with a technical recession confirmed for Q3 and Q4, growth for 2024 and 2025 has been revised upwards slightly to 0.5% and 0.7% respectively, with 2026 set to grow at 1.0%.
What is the expected interest rate in 2025? ›
The average 30-year fixed mortgage rate as of Thursday was 6.99%. By the final quarter of 2025, Fannie Mae expects that to slide to 6.0%. Meanwhile, Wells Fargo's model expects 5.8%, and the Mortgage Bankers Association estimates 5.5%.
What is the Bank of England prediction for 2024? ›
Monetary Policy Summary. The Bank of England's Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. At its meeting ending on 31 January 2024, the MPC voted by a majority of 6–3 to maintain Bank Rate at 5.25%.
What will happen to the economy in 2025? ›
In fiscal 2025, with no new tax cuts expected, revenue growth accelerates to 6.2 percent. On the other hand, we expect the growth of federal expenditures to slow down over the next two years, from 4.9 percent in 2023 to 3.8 percent in 2024 and then to 3.9 percent in 2025.
Will the economy get better in 2025? ›
U.S. real GDP growth on an annual average basis will be 2.3 percent in 2024, 1.5 percent in 2025, and 2.2 percent in 2026. National job growth will weaken sharply to only 35,000 monthly gains in the second half of 2024, rebounding to 115,000 job gains by late 2025 as aggressive Fed rate cuts spur investment spending.
What is the inflation rate in the UK in 2025? ›
The Organisation for Economic Co-operation and Development (OECD) lowered its predictions for headline UK inflation to an average of 2.8 per cent in 2024 and 2.4 per cent in 2025, from the 2.9 per cent and 2.5 per cent respectively forecast in November.
Why is British economy weak? ›
WEAK PRODUCTIVITY
Output per hour worked in similar countries has also increased only slowly since the global financial crisis. But low levels of business investment, Brexit barriers to trade, low public investment and problems with skills training have been cited as factors that have left Britain lagging its peers.
While the revised figures mean that Japan escaped recession – defined as two consecutive quarters of negative growth – it continues to be the world's fourth-largest economy after losing the number three spot to Germany.
Is Germany in a recession? ›
Germany's Economy Probably Is in Recession
Similarly, the Economy Ministry said most research institutes “expect GDP to fall again in the first quarter of 2024.”
Is Canada in a recession? ›
Canada avoided the recession expected by many forecasters (Chart 3), with real GDP rising by 1.1 per cent in 2023, over three times higher than what was forecasted in Budget 2023 (0.3 per cent). Canada's economy is growing.
Will UK economy recover in 2025? ›
While the UK's economic outlook is expected to remain modest this year, growth is predicted to build throughout 2024 before accelerating in 2025 thanks to falling inflation, higher consumer spending and anticipated reductions in interest rates, according to the new EY ITEM Club Spring Forecast.
Is the UK in a cost of living crisis? ›
The cost of living crisis refers to a period of time during which the cost of everyday essentials like food and bills increases more quickly than average household income. The UK has been experiencing a cost of living crisis since late 2021.
What will UK interest rates be in 5 years? ›
According to the BoE, interest rates are likely to come down to about 5.1% by the end of 2024, going further down to 4.5% in 2025 and 4.2% in 2026. Analysts don't provide UK interest rate forecasts for the next 10 years due to the complexity of factors that might significantly influence the future rate.
What will Bank of England interest rate be in 2026? ›
Projected interest rates in 5 years in the UK
The bank saw interest rates at 4.4% (lower than the current rate) in the second quarter of 2023, where the rate was projected to stay in Q2 2024, before falling down to 3.8% in Q2 2025. In 2026, the bank saw the rate at 3.6%.
Where will interest rates be in 5 years? ›
ING's interest rate predictions indicate 2024 rates starting at 4%, with subsequent cuts to 3.75% in the second quarter. Then, 3.5% in the third, and 3.25% in the final quarter of 2024. In 2025, ING predicts a further decline to 3%.
What is the next interest rate prediction for the Bank of England? ›
Markets convinced the BoE will cut rates by 0.25% in June 2024, following a similar rate cutting path to the US Federal Reserve. 7th November - Latest UK Interest Rate Forecast: Rates likely to remain at 5.25% until late 2024 with the first rate cut arriving in August 2024.
