Traders are holding firm on their expectations that the Bank of England will cut interest rates next month.
Money markets suggest there is a 93% probability that rates will be reduced from 5% to 4.75% in November, following official data showing the UK economy grew by 0.2% in August.
Joe Nellis, economic adviser at MHA, commented:
“While the modest GDP growth reported this morning will be welcomed by both the Government and businesses, it reflects an economy that has been close to stagnation since July.
The cautious and, at times, negative messaging from the Government, combined with uncertainty surrounding the upcoming Budget, has dampened corporate investment and household spending.
Additionally, confidence in the UK economy has been further weakened by ongoing geopolitical tensions, particularly recent escalations in the Middle East, the extended delay in the government’s Budget announcement, and poor weather impacting economic activity. These factors have collectively suppressed the consumer confidence needed to drive growth.
The Government will be hoping that their much-anticipated Budget and a potential interest rate cut by the Bank of England next month will help create a more favorable environment for investment and stimulate economic recovery.”
