Bank of England August rate cut 'unlikely'

Britons are warned that the Bank of England are unlikely to cut the interest rate in August's Monetary Policy Committee meeting as the GDP grew faster than expected.

Gross domestic product (GDP) increased by 0.4 per cent in May, official data showed.

With more shoppers returning to high streets and construction work recovering, the rebound was more positive than had been predicted.

Analysts had predicted 0.2 per cent increase.

The Bank of England have been holding interest rates at a 16-year-high of 5.25 per cent since August 2023.

The central bank has been widely predicted to launch its first cut since 2020 at the August meeting.

However, experts have suggested rate-setters could now be assessing whether the potential rate cut may be pushed back further.

Suren Thiru, economics director at The Institute of Chartered Accountants (ICAEW) said: “These figures confirm a robust rebound in economic activity as stronger services and construction output helped return the economy to growth.

“May’s GDP uptick may well have been followed by a June washout, with wet weather likely to have stifled output from key sectors of the economy, despite a helping hand to hospitality and some retailers from Euro 2024.

"These GDP figures may make an August rate cut less likely by providing those rate setters, who are concerned about underlying price pressures, with sufficient confidence about the UK’s economic recovery to continue putting off loosening policy."