Slower-than-expected UK growth this year will not deter the Bank of England from raising rates, according to a survey by economists.
Production will stumble by 1.4% from 1.8% in 2017, the median forecast showed slightly lower than the previous forecast of 1.5%. Nearly 60% of economists see a spur at the August meeting. The survey was conducted a week after the Bank of England’s announcement on May 10, leaving its key interest rate at 0.5%.
The economy was almost paralyzed in the first quarter in a snowy climate and a decline in consumers demand. Investors responded by reversing bets on a rate hike as it came to a point in May as a closed contract.
Mark Carney, the Bank of England’s governor said the economy is likely to recover from the recession in the first quarter and that policy will have to tighten even more in the coming years to keep inflation under control.
This vision was largely replicated by the predictions of economists. You can see production recovering to 0.4% this quarter and continuing at this rate until the end of next year. The most recent numbers, however, are varied. A report released by the Bank of England on Wednesday said investment intentions remained modest, saying that there was a significant slowdown in retail sales.
Economists had previously projected that consumer spending will also decline and export growth will fall to 2.5% this year, which is the lowest level since the survey began. The Bank of England said last week that it expects Britain’s growth engine to move towards export and investment and away from private consumption.