UK Economy Likely to Stall as Bank of England Seen Holding Rates Steady

Capital Economics economist Ruth Gregory said in a report that the Bank of England was likely to keep interest rates unchanged this year, although she did not rule out the possibility of rate hikes in July or September. According to Jin10, she said the contraction in the UK’s real GDP in April suggested the strong start to the year was losing momentum, which should help limit inflation pressures. She expected the economy to stagnate this quarter and next as rising energy prices further squeeze households’ real incomes. Gregory said the services sector was bearing the main impact from the Iran war shock, while industrial production could weaken further from May onward as a temporary boost from inventory accumulation reverses. She added that conditions for persistently high inflation were not in place.