John Healey is speaking to UK journalists at the IMF annual meeting in Bangkok now
Today’s better-than-forecast UK growth report is good news for chancellor John Healey as he hobnobs with other finance ministers at the IMF meeting in Bangkok.
But it may encourage the Bank of England to raise interest rates as soon as its next meeting in November….
“While August’s unexpected uptick all but confirms that the OBR will raise its growth forecast for this year from 1.1% to 1.4%, the Chancellor still faces a major Budget headache, as elevated borrowing costs eat into fiscal headroom and increase pressure for tax rises.
“These unexpectedly upbeat figures will further embolden hawkish sentiment among policymakers by reinforcing the view that the economy is strong enough to withstand a rate rise, making a November hike look highly likely.”
“The latest GDP figures are encouraging, with the economy growing by 0.7% in the three months to August, its strongest growth rate since May. On its current trajectory, the UK is likely to record growth comfortably above 1% this year, which would probably be enough to make it the second-fastest-growing economy in the G7.
“The UK’s growth performance has been a bright spot amid a less impressive run of economic news following events in the Middle East. Business investment has been an important driver, particularly spending on ICT hardware, likely linked to the build-out of AI infrastructure. The UK still lags the US in both the scale of that investment and the boost it provides to growth, but it is making progress and remains ahead of many of its European peers.
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