Britain’s economy has received an upgrade from Wall Street after official figures revealed another quarter of strong growth.
Bank of America has revised its forecast for UK GDP growth this year, following recent data that showed a surprising drop in unemployment, lower-than-expected inflation last month, and a 0.6% expansion in the economy during the second quarter.
The Wall Street giant increased its UK growth forecast from 0.8% to 1.1% and adjusted its inflation expectations down from 2.7% to 2.6% for 2024, and from 2.5% to 2.4% for the following year.
Despite these positive developments, Bank of America still anticipates that the Bank of England will only cut interest rates once this year, even though money markets are predicting two more rate reductions. This comes as data from the Office for National Statistics showed that services inflation declined more sharply than expected in July.
Ruben Segura-Cayuela, a European economist, commented:
“While the slowdown in services inflation suggests the possibility of an earlier rate cut in September, we would be cautious in interpreting this inflation decline, as it could partly be due to volatile factors.
We believe the Bank of England will need further evidence to determine if the decrease in domestic inflation is sustainable.”
