UK economy stuck in low gear: Interest rates need to be put on hold until late 2018 to support stalling economy

By Ernst & Young

With the UK economy looking set to remain stuck in low gear for the rest of this year, the Bank of England’s Monetary Policy Committee (MPC) should keep interest rates on hold until late 2018 to avoid weakening the economic outlook.

Download our latest EY ITEM Club forecast.

However with expectations high that interest rates may rise from 0.25% to 0.50% this November, the EY ITEM Club is urging the MPC to wait until the UK’s economic prospects look brighter and there is greater certainty over the Brexit transition arrangements.

Highlights from the EY ITEM Club forecast:

• GDP growth of 1.5% forecast for this year, same as in July
• Growth of 1.4% for 2018 has been revised up marginally
• Consumer price inflation is likely to rise just above 3% in 2017 but reduced back to the 2% target by the end of 2018

Compliments of Ernst & Young, a member of the EACCNY