LONDON, May 17 — Slower-than-expected UK growth this year won’t stop the Bank of England from at least one interest-rate increase, according to a Bloomberg survey of economists.
Output will stutter to 1.4 per cent from 1.8 per cent in 2017, the median forecast showed, slightly lower than the 1.5 per cent previously forecast. Nearly 60 per cent of economists see a hike at the August meeting. The poll was conducted in the week after the BoE’s May 10 policy announcement, when it left its key rate at 0.5 per cent.
The economy almost ground to a halt in the first quarter amid snowy weather and a pullback from consumers. Investors responded by pushing back bets on a rate increase having at one time seen a May move as a done deal.
BoE Governor Mark Carney said that growth will probably recover from its first-quarter slump and policy will still need to be tightened in the coming years to keep inflation under control.
That view of the UK economy was largely replicated in the Bloomberg survey. Economists see output recovering to 0.4 per cent this quarter and continuing at that pace until the end of next year, while a similar rebound may be seen across most advanced economies.
What our economists say
“The picture for advanced economies is clear—growth hit the skids at the start of the year. But rather than a sign that the global expansion is running out of steam, the slowdown seems to be explained by bad weather and local idiosyncrasies. A rebound in 2Q looks likely.” — Jamie Murray, Bloomberg Economics.
Recent figures have, however, have been mixed. A BOE report published yesterday said investment intentions remain modest and said there was a “marked” slowdown in retail sales.
Consumer spending will also falter more than economists had previously expected and export growth this year will slow to 2.5 per cent, the lowest since the survey began. The BOE said last week that it expects the UK’s engine of growth to shift toward exports and investment and away from household consumption. — Bloomberg