UK rates unlikely to rise before Q4

Related Content Related Articles

Slower economic momentum in the UK favours a rather cautious monetary stance, reinforcing our expectations that rate normalisation will not begin before Q4 2015. However, consumption will receive a further boost from low energy prices, calling for a careful watch over inflation in the next months.

Yesterday’s preliminary gross domestic product (GDP) reporting for Q4 2014 unveiled slightly weaker economic growth than expected. At 0.5% over the previous quarter, down from 0.7% Q3, momentum slowed a tick more strongly than expected by market consensus (0.6%). While this is not shocking, and the following final release might exhibit revisions, it offers indications that domestic growth remains robust while external demand, in particular from the stagnating eurozone, is dragging down the overall figure. Among the output-side indicators reported today, services expanded by a healthy 0.7%, while production output, more broadly associated with exports, contracted by 0.1%. Domestic consumption hence appears healthy, and will receive a further boost thanks to lower oil/energy prices in early 2015. With general elections approaching in spring 2015, beneficial growth data could help the Conservative Party to remain in power. Going forward, we believe momentum will remain softer than in 2013/ 2014, but nevertheless on track for an average of 2.5% in 2015. As usual, more insights will be available with the second reading of GDP data, to be published on 27 February.

David Meier is an economist at Julius Baer

Jonathan Boyd
Editorial Director of Open Door Media Publishing Ltd, and Editor of InvestmentEurope. Jonathan has over two decades of media experience in Japan, Australia, Canada and the UK. Over the past 17 years he has been based in London writing about funds and investments. From editing the newsletter of the Swedish Chamber of Commerce in Japan in the 1990s he now focuses on Nordic markets for InvestmentEurope. Jonathan was awarded Editor of the Year at the Professional Publishers Association (PPA) Independent Publisher Awards 2017. Shortlisted for the same in 2016, he was also shortlisted in 2017 and 2015 for the broader PPA Awards category Editor of the Year (Business Media).

Read more from Jonathan Boyd

Close Window
View the Magazine

I also agree to receive editorial emails from InvestmentEurope
I also agree to receive event communications for InvestmentEurope
I also agree to receive other communications emails from InvestmentEurope
I agree to the terms of service *

You need to fill all required fields!